Canada's Economy Bounces Back Despite Tariff Risks

Canada's economy has rebounded strongly in Q2, supported by resilient domestic demand and improving net trade. According to Royal Bank of Canada (RBC) economist Claire Fan, the country's growth is expected to remain robust despite the impact of U.S. Section 338 tariffs.

The tariffs target a narrow set of Canadian products, limiting their nationwide impact but posing risks to specific regions and industries. Fan notes that domestic demand remained resilient in Q2, while net trade recovered from a soft Q1.

Broader U.S. tariff rates are edging lower, consistent with a resilient U.S. economy benefiting from major infrastructure buildouts and government spending. As a result, RBC expects modest adjustment hikes in 2027 should these trends persist.