Canada's economy to see negative growth amid Trump tariffs: CFIB
The Canadian Federation of Independent Business (CFIB) expects to see negative growth in Canada's economy as businesses face low confidence driven by U.S. President Donald Trump's tariff war and its impact on supply chains.
The advocacy group, representing Canadian owners of small and mid-size businesses, released a report Thursday, based on responses from 719 CFIB members.
'While we forecast a contraction in the economy, at the same time certain indicators point out that it is normalizing in some ways,' said Simon Gaudreault, CFIB's chief economist and vice-president of research, in a news release. 'Inflation remains stable which puts us in a favourable position to contemplate easier monetary policy for the second half of the year. However, with Canada seeing a 1.9 per cent inflation and unexpectedly adding jobs in June, the Bank of Canada may now decide to maintain its interest rate on July 30.'
Statistics Canada's consumer price index (CPI), which measures inflation, slowed to 1.8 per cent in the second quarter and is expected to rise slightly to 1.9 per cent in the third quarter. The CFIB states the overall deceleration in prices was mainly driven by falling energy costs and lower prices for travel services, while increases in food and shelter costs provided some upward pressure.
The CFIB said gross domestic product (GDP) fell by 0.8 per cent in the second quarter and is expected to decline further by another 0.8 per cent in the third quarter. It said the contraction reflects persistently low business confidence, driven by trade tensions, and weakness in manufacturing, particularly in the transportation, machinery, and oil and gas sectors.
Canada–U.S. trade tensions causing high uncertainty
The group highlighted a Statistics Canada report that notes 48 per cent of businesses experienced supply chain disruptions over the past three months, and 64 per cent expect conditions to worsen.
The CFIB anticipates private investment will nosedive by 13.0 per cent in the second quarter and further drop by 6.9 per cent in third quarter. The national private sector job vacancy rate held steady at 2.8 per cent in the second quarter representing 397,00 unfilled positions.
'The one step forward, on step back trade situation is driving low business confidence, translating into paused or cancelled investment,' said Gaudreault. 'As trade tensions drag on, more businesses will be slowly adjusting to tariff threats and finding alternatives.'
The highest vacancy rates were in personal services and construction. On a yearly basis, information, arts and recreation (-0.8), agriculture (-0.8), personal services (-0.6), and natural resources (-0.6) saw the biggest drop in their vacancy rates. Manufacturing was the only sector reporting an increase (+0.1). Retail sales slowed in the second quarter, growing by 4.6 per cent.
The CFIB said many businesses and organizations wanted to place orders ahead of the tariffs' implementation. They said growth is expected to moderate to increase by 2.0 per cent in third quarter. T
The organization said wholesale and manufacturing businesses reported the highest impact from Canada-U.S. border delays, at 42 per cent and 40 per cent respectively. A proportion of 39 per cent of firms in personal services also reported disruptions, largely due to delays affecting repair shops for vehicles, household and commercial goods. Significant shares of businesses operating in retail (36 per cent) and construction (35 per cent) reported border delays, showing that supply chain bottlenecks affect both distribution networks and project-based work.
In contrast, service-oriented sectors reported fewer disruptions as they rely less on cross-border logistics.
Facing growing tariff-related pressures at the border, the CFIB said 62 per cent of small and medium enterprises have shifted to domestic markets. Nonetheless, supply chain disruptions remain widespread, revealing that the problem is not limited to international trade, but affecting internal logistics as well.
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