Economic Headwinds: Canada’s GDP Shrinks Amid Tariffs and Manufacturing Decline
U.S. Import Tariffs and Weak Consumer Sentiment Push Canadian Economy Toward Recession
A preliminary estimate indicates that Canada’s real GDP fell by 0.1% in both April and May 2025 as U.S. import tariffs and a decline in consumer sentiment took a toll on economic growth.
- The goods-producing industries experienced a 0.6% contraction in April, with manufacturing accounting for nearly all of this decline.
- Within manufacturing, durable goods production dropped 2.2%, marking its first fall in four months as eight out of ten subsectors contracted.
Impact on Key Sectors
The wholesale trade sector shrank by 1.9% in April, representing the largest monthly decline since June 2023.
- Activity slowed across seven of nine subsectors.
- The steepest drag came from motor vehicles and motor vehicle parts, down 6.8%, as both exports and imports were heavily impacted by new U.S. tariffs.
Market Reaction: Notable Canadian Stocks Decline
News of the GDP contraction has pressured major Canadian equities such as Shopify (SHOP), Canada Goose (GOOS), and Restaurant Brands International (QSR).
- Investor confidence has wavered amid concerns of wider economic slowdown and reduced cross-border trade activity.
Growing Recession Fears
Recent data underscores a continued slowdown for Canada’s economy, with U.S. tariffs rattling industries and undermining consumer confidence.
- Canada is among the nations most affected by U.S. President Donald Trump’s tariff regime, due to the tight economic integration with the United States.
The back-to-back contractions in April and May have heightened the risk that Canada could enter a recession in 2025.
- The economic deceleration also increases the likelihood that the Bank of Canada will opt for further interest rate cuts at its upcoming policy meeting on July 30.
- Inflation currently stands at an annualized 1.7%, remaining below the central bank’s 2% target.
Canada Goose: Analyst Outlook
Canada Goose (GOOS) holds a Moderate Sell consensus rating among analysts.
- The average GOOS price target of $10.98 suggests a potential 5.59% downside from current trading levels.