Canadian GDP Shows Resilience Despite U.S. Tariffs and Labor Disruptions
Summary:
Canada’s economy demonstrated modest growth in November 2025, with a 0.1% GDP increase despite October’s contraction. The manufacturing sector, particularly lumber production, suffered due to new U.S. tariffs, while labor strikes in multiple sectors further impacted economic activity. Economists warn of continued weakness in early 2026, though the finance and insurance sectors showed strength. The Bank of Canada maintains a cautious stance, holding interest rates steady amid economic uncertainty.
What This Means for You:
- Mortgage holders: Expect prolonged stable interest rates as the BoC prioritizes economic stabilization over inflation control
- Export businesses: Diversify markets beyond U.S. lumber trade to mitigate tariff impacts
- Investors: Monitor finance/insurance sector growth as potential bright spot in volatile economy
- Warning: Prepare for potential H1 2026 slowdown as weak economic momentum continues
Original Post:
By Melissa Shin
(Bloomberg) — The Canadian economy continues to display resilience despite U.S. tariffs, with initial estimates showing a small expansion last month.
Industry-based gross domestic product grew by 0.1% in November, according to a flash estimate from Statistics Canada on Tuesday. It had fallen by 0.3% in October, matching the monthly contraction expected in a Bloomberg survey of economists.
Charles St-Arnaud, chief economist at Servus Credit Union, said his analysis suggests the economy will shrink by 0.2% in the fourth quarter, pointing to “the weak starting point to Q4 and the lack of rebound in November.”
“The Canadian economy is skating on thin ice in Q4,” said Michael Davenport, senior Canada economist with Oxford Economics. “Although the economy avoided a technical recession in 2025, we expect weak underlying momentum to carry through H1 2026.”
The manufacturing sector fell 1.5% in October, largely offsetting an expansion from the previous month, primarily due to a drop in machinery manufacturing. Wood product manufacturing recorded its largest decline since April 2020, reflecting production slowdowns after the U.S. government imposed additional tariffs on Canadian lumber beginning Oct. 14.
Labour disruptions also contributed to October’s contraction. Strikes by teachers in Alberta, government workers in British Columbia and postal workers nationally reduced activity in the public sector, alcohol retailers, and transportation and warehousing, respectively.
Mitigating the overall GDP drop was the finance and insurance sector, which rose 0.4% in October in its fifth consecutive monthly increase.
“The subdued November rebound suggests that the Canadian economy has some work cut out to avoid another negative print for the final quarter of the year,” said Robert Kavcic, senior economist with Bank of Montreal, in a client note.
Tuesday’s report “shows that economic activity remains volatile in Canada,” St-Arnaud said. “The modest growth in recent months is also somewhat at odds with the strength in the labour market, which saw strong job creation in recent months.”
The Bank of Canada kept its policy interest rate at 2.25% on Dec. 10, calling the economy “resilient overall” but warning of elevated uncertainty.
Governor Tiff Macklem also signalled that the bank will continue to hold rates steady in the near term, absent any surprises to its outlook.
–With assistance from Mario Baker Ramirez and Laura Dhillon Kane.
©2025 Bloomberg L.P.
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bloomberg Charles St-Arnaud Dashboard economic data economic growth economic indicators gdp Michael Davenport Robert Kavcic statcan GDP statistics canada
Last modified: December 23, 2025
Extra Information:
1. Statistics Canada GDP Report – Official source for detailed GDP breakdown by sector
2. Bank of Canada Rate Decision – Explains monetary policy context for GDP performance
3. Global Affairs Canada Tariff Information – Details U.S. lumber tariffs impacting manufacturing
People Also Ask About:
- Is Canada in a recession in 2025? No, but Q4 2025 shows contraction risks with 0.2% expected decline.
- How do U.S. tariffs affect Canadian GDP? October lumber tariffs caused largest wood product decline since April 2020.
- When will Bank of Canada cut rates? Likely not until H2 2026 given current economic uncertainty.
- Why is finance sector growing during slowdown? Benefiting from stable interest rates and increased financial activity.
- How accurate are flash GDP estimates? Statistics Canada’s preliminary data typically aligns within 0.1% of final figures.
Expert Opinion:
“The divergence between GDP weakness and labor market strength suggests Canada faces a productivity paradox,” notes Oxford Economics’ Davenport. “This unusual dynamic may force policymakers to reconsider traditional economic indicators when making decisions about interest rates and fiscal stimulus in 2026.”
Key Terms:
- Canadian GDP growth November 2025
- U.S. lumber tariffs impact on Canada
- Bank of Canada interest rate forecast 2026
- Canadian manufacturing sector decline
- Finance and insurance sector growth Canada
- Labor strikes economic impact Canada
- Statistics Canada flash GDP estimate
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