Trade Tensions Weigh on Canada's Growth Amid Resilient Labour Market

Canada's economy is expected to face significant headwinds in the coming quarters due to ongoing trade tensions with the United States, according to CIBC Capital Markets. The economists predict that if tariffs on Canada remain in place and additional measures are implemented, growth could slow significantly into 2027.

The labour market, however, is seen as a potential cushion against the negative impact of trade tensions. In recent months, Canada has added 136,000 jobs compared to 81,000 in the previous six-month period, according to the Labour Force Survey.

CIBC estimates that the monthly employment growth needed to keep the unemployment rate stable has fallen to around 2,000 jobs from over 50,000 in 2024. This suggests that weaker monthly employment figures may not translate into a significant deterioration in unemployment as seen in earlier years.