Canada's Economic Rebound Threatened by Escalating Trade War

Canada's economic rebound is at risk due to the re-escalating trade war between Canada and the US, economists warn. The new tariffs are expected to carve half a percentage point off Canada's economic growth as business investment and confidence take a hit.

Economists at Bank of Montreal estimate that the direct impacts of the tariffs will be felt most acutely in British Columbia, followed by Ontario and Quebec. The pain won't be immediate, but rather play out over the coming months.

While some industries are expected to struggle under the weight of the new tariffs, most economists agree that Canada's economy can absorb the hit from a macro perspective. However, Bank of Montreal expects business investment and confidence to take a hit as a result of the tariffs.

The breakdown in trade talks comes at a critical time for Canada's economy, which had been showing signs of a rebound. The country's real gross domestic product is on track for solid growth in the second quarter of 2026, according to early reports from Statistics Canada.