Canada’s economy is expected to grow by just 1.5 per cent in 2025, as ongoing uncertainty around U.S. trade policy continues to drag on business and consumer confidence, says a new report from the Conference Board of Canada.
“The economy outperformed expectations in the first quarter of 2025, but the momentum is quickly fading,” said Cory Renner, associate director of economic forecasting at the Conference Board. “Trade disputes are casting shadows over multiple sectors of the economy and are expected to dampen growth throughout the remainder of the year.”
Housing, labour and investment outlooks dim
The report flags a string of challenges for employers, including weakening labour market conditions, a cooling housing sector, and subdued business investment. Elevated household debt, poor affordability and a slowdown in population growth are weighing on housing demand. While a federal initiative to establish the Build Canada Homes agency and a likely quarter-point interest rate cut later this year may help, the report says the effects will be modest.
Canada’s labour market is also showing signs of strain. Rising unemployment, slower job creation and tentative hiring plans reflect fragile business sentiment. The impact of migration policy changes announced by the federal government in 2024 is starting to show, as employment growth briefly outpaces labour force gains.
Trade tensions with U.S. ripple across sectors
Canadian exporters continue to struggle amid heightened tensions with the United States. While some businesses have pivoted to other markets, the drop in exports to Canada’s largest trading partner has outpaced those gains. Imports are also expected to dip, as consumers and businesses cut back on spending.
The United States economy, which posted strong growth over the past two years, shrank slightly in the first quarter of 2025. The report links the downturn to new trade and immigration policies, citing weakened confidence, rising joblessness, and accelerating inflation. U.S. growth is forecast to slow to 1.4 per cent in 2025.
In Canada, investment prospects remain tepid. While targeted policy changes could help restore investor confidence, lingering uncertainty in the electric vehicle sector is adding to the risks.
