Title: Canadian Economy Projected to Enter Recession This Year

OTTAWA — A Crown corporation has predicted that the Canadian economy will officially enter a recession this year, amid a global economic downturn influenced by U.S. tariff policies. Export Development Canada (EDC) forecasts a modest economic growth of only 0.9 percent for 2025, with a slight increase to 1 percent expected next year. This growth rate is lower than that of the United States, which is projected at 1.7 percent, and below the average for developed economies at 1.3 percent. However, it is still stronger than the anticipated growth rates for Germany and France, which are 0.3 percent and 0.6 percent, respectively.

The EDC, which aims to assist Canadian companies in international markets, also noted that developing countries are expected to experience significantly higher growth rates of 3.8 percent, contributing to an overall global growth rate of 2.7 percent. In the quarterly report, EDC chief economist Stuart Bergman stated, "Trade tensions have destabilized the foundations for the global economy."

Canada's primary trade challenges stem from its relationships with the United States and China. The U.S. has imposed substantial tariffs on various Canadian exports, including steel, aluminum, copper products, motor vehicles, and lumber. Exports that do not comply with the Canada-U.S.-Mexico Agreement (CUSMA) face tariffs as high as 35 percent. Additionally, China has placed tariffs on Canadian canola, pork, and seafood.

As a result of these trade tensions, the EDC reports rising unemployment and decreased business investment in machinery and equipment in Canada. This comes despite a surge in exports earlier this year, as companies rushed to stockpile supplies before the tariffs took effect. The Canadian economy has also been affected by a 15 percent decline in crude oil prices over the past year.

Statistics Canada reported that the national unemployment rate remained steady at 7.1 percent in September, following a 0.2 percentage point increase in August. This year, the unemployment rate has risen by 0.5 percentage points, reaching its highest level in over four years.

The EDC's report indicates that the Canadian economy will continue to face challenges in the medium term due to structural issues, including slowing population growth, low productivity from limited investment, and high consumer debt. Benjamin Tal, deputy chief economist at CIBC World Markets, echoed the EDC's concerns, stating that the Canadian economy will be "very vulnerable" in the next three to six months. Tal anticipates that the Bank of Canada will lower interest rates by 25 basis points later this month and again before the year ends.

Tal emphasized that the overall direction and core strength of the economy are more critical than the possibility of a technical recession, but he does not foresee significant improvement until the latter half of next year. He remarked, "The economy is not strong by any sense of the imagination."

The EDC's bleak outlook adds pressure on Prime Minister Mark Carney's government to secure a trade agreement with the United States, whether through a comprehensive deal or smaller sector-specific agreements targeting steel, auto, aluminum, or softwood lumber. This pressure is also felt in provincial and territorial capitals across Canada.

Since taking office in April, Carney's government has focused on addressing long-term structural issues in the Canadian economy. Initiatives have included upgrading infrastructure such as ports and rail, reducing income taxes, investing in defense, and eliminating the consumer portion of the carbon tax.

Polls indicate that Canadians are supportive of Carney's efforts to tackle structural problems but are increasingly eager for more immediate results. Additional measures to stimulate the economy are anticipated in the upcoming federal budget scheduled for early November. However, Tal cautioned that the government may struggle to find short-term solutions that also promote long-term growth.

This forecast from the EDC is not the first to predict an economic slowdown in Canada this year or next. Various economic forecasts from institutions such as TD Economics, Deloitte Canada, and Capital Economics have also suggested a downturn. Other organizations, including the Royal Bank, Scotiabank, and the OECD, have projected a slowdown but not a recession. A recession is defined as two consecutive quarters of negative economic growth.