Canada's economy booming despite tariffs
- Canada’s economy kept expanding into spring, with Statistics Canada estimating 0.4% first-quarter growth even as U.S. tariffs kept hitting trade-exposed industries. - The split is the whole story: GDP rose 0.2% in February, but the Bank of Canada says tariff-hit sectors are just 1% of output. - That resilience matters because tariffs are still dragging exports and investment lower — and the bigger risk is prolonged uncertainty.
Canada is not having the recession many people expected. That’s the weird part. U.S. tariffs are still hitting parts of the country hard, but the national numbers coming out in late April and early May show an economy that is still growing, still hiring a bit, and still finding ways to reroute the damage instead of simply collapsing. ### So what’s the actual news? The fresh data point is Statistics Canada’s April 30 release. Real GDP by industry rose 0.2% in February, after another gain in January, and the agency’s advance estimate says March likely grew too. Put together, that points to about 0.4% growth in the first quarter of 2026. That is not “booming” in the usual hot-economy sense, but it is clearly stronger than a tariff panic story would suggest. ### If tariffs are real, why isn’t growth falling over? Because the pain is concentrated. The Bank of Canada’s latest Monetary Policy Report says industries facing sector-specific U.S. trade restrictions account for about 1% of Canadian output and employment, though they matter much more for exports. In other words, tariffs can do serious damage to specific factories and towns without automatically dragging the whole country into recession. ### Which sectors are getting hit first? Steel and lumber are the clearest examples in the Bank of Canada’s review one year into the trade restrictions. Those exports have fallen sharply, while other industries have held up better than expected. Autos, metals, and other cross-border manufacturing chains are still the obvious pressure points because they depend on moving parts back and forth efficiently, and tariffs break that logic fast. ### What is holding the rest of the economy up? Mostly domestic demand and resource-linked activity. February growth was led by goods-producing industries, especially manufacturing and mining, quarrying, and oil and gas extraction. The Bank of Canada also says consumer spending and government spending have been supporting GDP even while exports and business momentum to offset some external damage — at least for now. ### Is the labor market still okay? Mixed, but not cracking. Employment rose 0.1% in March to 21.05 million people, while the unemployment rate held at 6.7%. That is higher than the pre-pandic norm, and payroll employment actually fell by 60,200 in February, so this is not a broad-based jobs boom. But it also does not look like a tariff-driven labor shock spreading everywhere at once. ### What about inflation? Inflation sped up in March, but not mainly because of tariffs. Consumer prices rose 2.4% from a year earlier, up from 1.8% in February, and the main driver was energy — especially gasoline tied to the Middle East conflict. That matters because it muddies the picture. Canada is absorbing trade stress at the same time it is dealing with a separate oil-price shock. ### So is everything fine? Not really. The Bank of Canada is explicit that activity is on a lower path than it would have been without tariffs, and that exports and investment are still being held back by trade uncertainty and questions around the future of CUSMA. Think of it less as “Canada dodged the hit” and more as “Canada spread the hit around and kept moving.” ### Bottom line? Canada’s economy looks resilient, not invincible. The headline numbers are better than the tariff drama implies, but the catch is that resilience can hide a lot of uneven pain underneath.
