Canada: Staff Concluding Statement of the 2025 Article IV Mission

December 5, 2025-Canada's economy has held up better than expected despite a significant external trade shock. U.S. tariff increases-and Canada's more limited and now largely withdrawn retaliatory measures-have disrupted tightly integrated North American supply chains, raised input costs, and hit trade-exposed sectors hardest. The impact has been mitigated by continued CUSMA exemptions and firms' early adjustments, but output, employment, and investment have still weakened.

Lower commodity prices, softer external demand, slowing immigration, and tariff uncertainty have added to the drag, exposing long-standing structural headwinds from weak productivity, slow capital deepening, and lagging innovation. Recent policy actions, including targeted support to affected firms and measures in Budget 2025 to encourage investment, have helped cushion the blow. The priority now is to manage near-term pressures while advancing reforms that strengthen competitiveness, productivity, and resilience within a framework that preserves macro-fiscal sustainability.

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Source: imf.org