Canadian economic forecast for 2026
As we know, the Canadian economy faced headwinds in 2025. The imposition of tariffs by the United States and China on Canadian exports had a definite impact on our economic growth.
The new year is shaping up to be another turbulent one, as the renegotiation of the United States–Mexico–Canada Agreement (USMCA) will once again create a climate of uncertainty that will hamper the country’s economic activity. Canada’s GDP is expected to grow by a modest 1% in 2026, down slightly from 2025, which is expected to close with 1.2% growth.
Before analyzing the economic outlook for 2026, let’s review 2025, which ended on a positive note, marked by growth in real GDP and employment. This performance marked a significant rebound after a 1.8% contraction in real GDP in the second quarter.
Key forecasts for 2026
The impact of tariffs
The impact of tariffs on the economy nevertheless marked the last year. Canadian steel exports declined by 25%, while those of aluminum dropped by 6% and those of the automotive sector by 5%. Furthermore, the Canadian economy has not yet fully felt the effects of the tariffs recently imposed on the lumber and kitchen cabinet sectors.
The good news, however, is that the impact was limited, especially in sectors affected by tariffs. This is evident in the fact that growth in the rest of the economy has offset the effect of tariffs and prevented a recession.
The job market has also strengthened, with 180,000 jobs created in the last three months of 2025, resulting in a decrease in Canada’s unemployment rate to 6.5% in November. The number of jobs even increased in the manufacturing sector, which was hit the hardest by tariffs.
What can we expect in 2026?
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