Canada's Economic Rebound Imperiled by Escalating Trade War
A new escalation in the trade war between Canada and the US has put Canada's economic rebound at risk, according to economists.
The tariffs, which will be implemented on September 8, are expected to carve half a percentage point off Canada's economic growth, with business investment and confidence taking a hit. This comes after Canada's economy had been showing signs of a rebound, with real gross domestic product (GDP) on track for solid growth in the second quarter of 2026.
Bank of Montreal senior economist Robert Kavcic noted that businesses were initially looking past tariff headlines but this new action will be the toughest since the spring of 2025. North America economist at Capital Economics, Bradley Saunders, estimated that Canada's effective tariff rate has nearly doubled to 5.6 per cent from 2.9 per cent previously.
Prime Minister Mark Carney has pledged to retaliate with dollar-for-dollar tariffs starting September 8. The extent of economic harm will depend on the degree of fiscal stimulus from Canadian governments in response to the new US duties, economists say.