Canada Exports Surge Amid Tariff Uncertainty

Canada's economy got a late-quarter boost from exports, setting up a strong second-quarter growth print, according to BMO Capital Markets. The bank's senior economist, Shelly Kaushik, notes that energy shipments strengthened and other goods such as autos began to recover from earlier trade uncertainty.

This helped push Canada's current-account surplus to its biggest share of the economy since 2008, with a nearly 4% annualized real economic growth rate in Q2 expected by BMO. However, some of this boost may have come from 'front-running', where companies rush orders ahead of possible tariffs.

The effect of this front-running could fade by August, potentially turning the trade channel that fueled Q2 growth into a drag in Q3, especially as tariffs and countertariffs ripple through supply chains. BMO estimates that the recent mix of tariffs, countertariffs, and support programs could cut growth by about half a percentage point over a year if nothing changes.

Markets are more interested in what this implies for future quarters than a strong GDP headline. If Q2 was partly powered by tariff front-running, that strength can quickly fade, leaving investors to focus on softer Q3 momentum and how the Bank of Canada responds when growth cools but countertariffs keep inflation sticky.