Canada's Economy Surges in Q2, Braces for Tariff Headwinds

The Canadian economy experienced a strong second quarter, with real gross domestic product (GDP) rising 3.3% on an annualized basis, according to Statistics Canada. This growth rate is the fastest quarterly pace since early 2023 and exceeds the Bank of Canada's forecast of 2.5% growth in the quarter.

BMO chief economist Doug Porter described this result as 'solid' and noted that it follows a period of almost no growth in the previous four quarters combined. The economy saw increases in spending among households, businesses, and governments, with exports also rising by 3.6%, led by a rebound in shipments of passenger cars and light trucks.

However, economists warn that this momentum is unlikely to carry over into the third quarter due to new tariffs imposed by the US. The re-escalating trade war will likely sour the growth outlook for the Canadian economy, according to Ariane Curtis, senior North America economist at Capital Economics.