Canadian Economy Set for Recession Amid Trump Tariffs, EDC Warns

UPDATE: Export Development Canada (EDC) has just announced that the Canadian economy is on the brink of a recession, a situation deeply tied to U.S. President Donald Trump’s controversial tariff policies. The report indicates a dismal growth forecast of only 0.9 percent for 2025, raising urgent concerns for Canadians and policymakers alike.

The implications of this forecast are significant. As the global economy wrestles with trade tensions, Canada is projected to lag behind major economies, including the United States, which is expected to see growth of 1.7 percent. The EDC’s chief economist, Stuart Bergman, highlights that these trade tensions have destabilized the global economic landscape.

The U.S. tariffs on Canadian exports—including steel, aluminum, and lumber—are squeezing businesses, leading to increased unemployment and reduced investment in machinery. Current data shows the national unemployment rate at 7.1 percent, the highest it has been in over four years. This marks a troubling increase of 0.5 percentage points since the beginning of the year.

Looking ahead, the EDC warns that the Canadian economy will face prolonged challenges, including a slowing population growth rate and high consumer debt. Economic expert Benjamin Tal from CIBC World Markets agrees with the EDC’s gloomy outlook, stating that the Canadian economy will remain “very vulnerable” for the next three to six months. He anticipates that the Bank of Canada will cut interest rates by 25 basis points later this month, with another cut expected before the year concludes.

The pressure is mounting on Prime Minister Mark Carney to secure a favorable trade deal with the U.S. or implement policies that can stimulate short-term economic growth. Recent polls suggest that while Canadians appreciate efforts to address long-term structural issues, they are also eager for immediate results.

As the economy braces for potential downturns, the upcoming federal budget in early November is anticipated to include measures aimed at bolstering growth. However, experts caution that the government may struggle to find solutions that effectively support both immediate needs and long-term stability.

This urgent economic forecast from EDC adds to a growing chorus of warnings from various financial institutions, including TD Economics and Deloitte Canada, indicating that the Canadian economy may be on a precarious path. As the situation develops, Canadian citizens and businesses alike are advised to remain vigilant and adaptive to these changes.

The overarching sentiment is clear: the time for decisive action is now, as the potential for a recession looms ever closer, posing risks not just for Canada but reverberating through the global economy.