Reeling from Trump Tariffs: Export-Dependent Canada Sees Sharp Q2 GDP Decline

GDP Contracts by 1.6% on Annualized Basis
First Economic Downturn in Seven Quarters

The tariff hikes imposed by the Donald Trump administration in the United States have dealt a blow to the Canadian economy.

According to Statistics Canada on the 29th (local time), Canada's real gross domestic product (GDP) for the second quarter decreased by 1.6% on an annualized basis, marking the first economic contraction in seven quarters.

The decline in exports to the United States, Canada's largest trading partner, is analyzed to have contributed to the drop in GDP. According to Statistics Canada, exports in the second quarter fell by 7.5%, representing the largest decrease in the past five years.

In particular, due to the imposition of U.S. tariffs, exports of passenger cars and light trucks plummeted by nearly 25%.

Corporate investment in machinery and equipment during the second quarter also declined by 0.6%, marking the first decrease since the COVID-19 pandemic.

Nathan Jensen, Deputy Chief Economist at Royal Bank of Canada, the country's largest bank, stated, "The significant decline in exports and the sharp drop in U.S. imports have been major factors in the economic slowdown," adding, "trade-exposed sectors have weakened, and corporate investment has also decreased as expected."

In March, after the Trump administration imposed a 25% tariff on steel and aluminum, Canada announced retaliatory tariffs on U.S. products and implemented some of them. On the 1st, President Trump signed an executive order raising the reciprocal tariff rate on Canadian goods from 25% to 35%, increasing pressure on Canada. Subsequently, on the 22nd, Canadian Prime Minister Mark Carney withdrew some of these retaliatory tariffs, effectively conceding.