Canada's GDP Bounces Back, But Trade Uncertainty Looms Large

Economists are impressed with Canada's GDP data, which shows a welcome rebound in the second quarter. TD Bank director and senior economist Andrew Hencic said that the bounce-back was as expected, with healthy recoveries seen across various sectors.

The print indicates that growth was roughly 1.8 per cent (annualized) in the first half of the year, despite some volatility in trade figures.

However, economists are now concerned about trade uncertainty, which is back on the table due to new U.S. tariffs and Canadian retaliation. According to Hencic, these duties will likely shave 0.3 to 0.6 percentage points from growth over the next year.

Desjardins economist Royce Mendes noted that households and businesses were beginning to navigate the trade-related uncertainty before the latest round of tariffs, but the fresh wave of protectionism injects significant uncertainty into the outlook.

Bank of Montreal chief economist Douglas Porter said that while Friday's data was impressive overall, there's not much to move the needle for the Bank of Canada. He expects interest rates to hold until 2027, with a possible extension depending on how growth and inflation respond to the tariffs.