Canada faces significant recession risks in 2025, primarily driven by U.S.-imposed tariffs and domestic policy shifts. Economists, including those from Deloitte, Desjardins, and Oxford Economics, predict a technical recession—defined as two consecutive quarters of negative GDP growth—starting as early as Q2 2025. Forecasts suggest GDP contractions of 1.3% in Q2, 0.4% in Q3, and 0.3% in Q4, with recovery not expected until 2026.
Key Factors:
1. U.S. Tariffs: President Trump’s 25% tariffs on Canadian goods (10% on energy) threaten to slash exports, which account for nearly 20% of Canada’s GDP. This could reduce GDP by 2–4% if sustained, with 150,000 job losses and unemployment rising to 8% by year-end. Retaliatory tariffs by Canada could further deepen the downturn and spike inflation to 7.2% by mid-2025.
2. Immigration Slowdown: Canada’s recent population growth (3.2% annually) has masked economic weakness by boosting consumer spending. However, new policies cutting permanent resident admissions from 485,000 to 395,000 in 2025 could stall this growth, reducing aggregate demand and tipping the economy into recession.
3. Weak Per Capita GDP: Real GDP per capita has declined for six consecutive quarters, a trend unseen since the 1981–82 recession. This signals underlying economic stagnation, with some economists arguing Canada is already in a “silent recession” despite headline GDP growth.
4. Consumer Sentiment: Surveys show 63% of Canadians expect a recession within the next year, with rising costs and tariff fears eroding confidence. Unemployment rose to 6.7% in March 2025, and further job losses could curb spending.
Counterpoints: The Bank of Canada projects 1.8% GDP growth in 2025, assuming no major tariff escalation, with inflation near 2% and interest rate cuts (from 2.75% to 2.25% by Q3) supporting consumer spending. Strong job growth (330,000 jobs in 2024) and a resilient housing market could mitigate some risks. However, these projections hinge on tariff exemptions or negotiations, which remain uncertain.
Conclusion: Canada is teetering on the edge of a recession, with tariffs and immigration curbs as the primary “bricks” threatening economic stability. While some indicators suggest resilience, the consensus leans toward a downturn unless trade tensions ease.