The Canadian economy experienced a significant contraction in the second quarter of 2025, with real gross domestic product (GDP) declining by 0.4 per cent, a stark reversal from the 0.5-per-cent gain in the first quarter, according to federal data.

The downturn was primarily driven by the cascading effects of U.S.-imposed tariffs, which have slowed trade and stifled business investment, according to a report released Friday by Statistics Canada.

Exports plummeted by 7.5 per cent in the second quarter, following a modest 1.4-per-cent increase in the first. The most dramatic hit was to the automotive sector — exports of passenger cars and light trucks plunged by 24.7 per cent. Exports of industrial machinery and travel services also saw double-digit declines.

Imports from the U.S. into Ca

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