Erik Hertzberg
(Bloomberg) – The Canadian economy signed for the first time in nearly two years as exports and commercial investment with the United States are in trouble.
Statistics Canada reported on Friday that the age of Canada’s GDP in the second quarter was 1.6%. This is the biggest decline since the league’s pandemic on the 19th and the first contraction in nearly two years.
While roughly consistent with Bank of Canada’s forecast, its prints are worse than what Bloomberg’s survey of economists, which dropped 0.7%.
After the report, Loonie fell to a little while, trading at $1.3770 as of 8:35 a.m. compared to the dollar. Canadian debt gathered across the curve, with two-year yields falling to 2.66%.
Exports fell by 27% as U.S. tariffs on Canadian goods damaged the country’s freight abroad. Not only does this reverse the temporary boost in trade activity, it is driven by shippers trying to advance in the tariff barrage of President Donald Trump. Imports fell by 5.1%.
Business investment signed 10.1% after only 1.1% in the first quarter, highlighting the pessimism faced by Canadian companies as they relate to uncertainty and changing policies with our taxation and policies.
The data captures the serious damage caused by the trade war that began before 2025 with Trump threatening and then imposing tariffs on imports of many Canadian products, including steel, aluminum, automobiles and other commodities. The United States is Canada’s largest trading partner.
Meanwhile, the report shows some evidence that trade losses are not spreading rapidly in the wider economy.
The Bureau of Statistics said preliminary industry-level data showed monthly that Canada’s economy rose by 0.1% in July after an unexpected contraction of 0.1% in June. There were some signs of intensity in the end domestic demand, up 3.5% in the second quarter, due to a 4.5% increase in household consumption, which accelerated despite the large population growth.
Meanwhile, the resilience of the home may be tested in the coming months. Disposable income rose only 1.3% in the three months between April and June, the weakest growth in more than two years, possibly reflecting the continued loosening of the country’s labor market.
The data also showed that despite insufficient U.S. export demand, Canadian companies are still increasing their stocks, which was about $19 billion ($13.8 billion) in inventory investment in the second quarter, the most since 2022, when companies in the country put more currencies in the grocery supply chain.
Total government spending increased by 5.1%. Investment in residential structures rose 6.3%.
Bank of Canada officials said they are opening up further if the economy weakens and price pressures are under pressure. Their next decision is September 17.
Before release, traders’ overnight swaps would make the next meeting a 40% chance of lowering their tax rates. The policy interest rate is 2.75%.
The United States is around 5% to 7%, and the U.S.’s effective tariff rate on Canadian goods imports remains the lowest in the world. This is because goods crossing the border under the US-Mexico-Canada agreement under the trade treaty between North American countries.
– With the assistance of Mario Baker Ramirez and Carter Johnson.
©2025 Bloomberg LP
Visited once today, visited once today
Bloomberg
Last modified: August 29, 2025
