Consumers pull back on spending amid trade war concerns, new data shows

Global News

4 hours ago

Consumers are continuing to pull back on their spending amid the uncertainty of U.S. President Donald Trump's tariffs, according to a new report from TD Economics.
'Canadian consumers hit pause in the second quarter of 2025, reacting to escalating trade tensions … unlikely to splurge on large purchases when they're worried about losing their jobs,' the report says.
'Said plainly: the damage is done.'
What does the data show?
The report, based on the latest credit and debit card spending data in the second quarter (April to June), showed that although the total amount spent increased by 1.5 per cent compared to last year, that is a decline from 5.4 per cent in the first three months of the year.
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On top of this, TD says it is lowering its forecast for the remainder of the year as it expects this trend to continue with 'some recovery toward the end of the year.'
The trend is also consistent with the latest numbers from Statistics Canada, which showed most recently that in April, retail sales increased by 0.3 per cent compared to March. That's down from a 0.8 per cent increase in March compared to February.
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'With the elimination of carbon tax, spending at gas stations declined. So basically cheaper spending at gas stations,' says economist Maria Solovieva at TD Bank Group.
At the start of April, Prime Minister Mark Carney removed the consumer carbon price, which may have contributed to the overall decline in card spending, as the amounts tracked as being spent at places like gas stations declined.
When looking beyond the headline reading, there are more specifics in the report which show where consumers may be cutting back.
'We can break it down by high-level categories like furniture spending declining, for example, grocery spending, that suggests that we are, as Canadians, we're a little bit more cautious potentially,' says Solovieva.
'Similarly with services spending, like air travel, for example … we also saw the slowdowns in those types of spending, or a complete contraction.'
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4:15
NerdWallet Consumer Credit Card Report
Although the impact of Trump's tariffs may not be fully reflected yet in higher prices for goods and services, the uncertain outlook for household budgets and the labour market may be leading many consumers to take a cautious approach when opening their wallets.
What are Canadian consumers most concerned about?
Trump's tariffs have long been expected to lead to job cuts as higher costs could weigh on business expansion budgets on top of those of consumers.
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A separate TD report warned that on the current trajectory, the trade war could lead to 100,000 additional job cuts by the third quarter depending on how governments respond.
'Some of us are, especially who are maybe working in the sectors that are tied to U.S. trade, potentially expecting some reduction in their hours, working hours, or potentially layoffs,' says Solovieva.
'So that uncertainty created this environment where consumers just decided to be a little bit more cautious and perhaps not to spend on those items.'
The latest labour market data from Statistics Canada showed unemployment increased to seven per cent in May, led by job losses in manufacturing. The trend is forecast to continue as the trade war evolves, and many workers in vulnerable sectors may be bracing for challenging times ahead.
'We actually are seeing that in the data already, and some are already saying, you know what, I need to be a little bit more careful with what I'm buying in this period of time. So we are expecting still a little bit of an increase in unemployment. We're currently at seven per cent unemployment rate. We're expecting it to rise to 7.2 per cent,' says Solovieva.
'We'll see how the numbers play out, but consumption will probably be flat for Q2 and potentially with negative momentum into Q3. So we expect the contraction in the third quarter.'