Canada economy stalls in July amid trade and tariff pressures

Canada’s economy experienced a period of stagnation in July, with real GDP remaining essentially unchanged (0.0%) following a period of growth in the second quarter. While the construction sector saw a 1.3% increase—driven largely by non-residential projects like a new hospital in Ontario—and the utilities sector rose 1.7% due to heat-wave-driven electricity demand, these gains were offset by contractions in manufacturing (-0.9%) and retail trade (-1.0%).

Economic outlooks suggest mounting pressure from shifting global trade dynamics. The Bank of Canada noted that U.S. tariffs and trade barriers are reshaping the economic landscape, particularly impacting the automotive, steel, aluminum, and lumber industries. Deloitte has adjusted its forecasts, raising 2026 GDP growth slightly to 0.9% but cutting the 2027 projection to 1.6% due to the anticipated impact of American tariffs and import bans.

While consumer spending and business investment in certain sectors like machinery remain active, housing continues to act as an economic drag. The Bank of Canada maintains that domestic economic indicators, including inflation and employment, will remain the primary drivers for future interest-rate decisions.