All Canadian metros worse off following recent tariff changes

All Canadian provinces and metros are worse off in our April baseline compared to March. Those with a higher exposure to extraction and manufacturing face larger downgrades to their GDP growth outlooks. At the province level, Newfoundland & Labrador and Alberta have been lowered the most from our last forecast. At the metro level, Windsor, Saint John, Edmonton, and Saguenay have been hit the hardest.

Around the world, every economy will be negatively affected by the US’ substantial (albeit scaled back) tariff hikes. The US is set to face a combination of supply and demand shocks, while the rest of the world will be hit by a more conventional external demand shock. Economies that have strong trade links with the US and are facing sharp tariff hikes will be hit especially hard.

Since our March forecasts, tariff policy between the US and Canada has evolved. US 25% tariffs remain on all non-USMCA-compliant goods imports from Canada, but most USMCA-compliant imports are now exempt from US tariffs, except for new tariffs on steel, aluminum, and the non-US content of autos and parts. Canada has responded with 25% counter-tariffs on around C$95 billion of US goods imports, compared to the C$155 billion we had previously assumed.

Although US-Canada tariffs have been scaled back relative to our March baseline assumptions, we expect Canada’s recession will be deeper due to weaker global demand from substantially higher US tariffs on the rest of the world. As a result, we have lowered our 2025 GDP growth forecast to 0.7% (0.4 ppts below our March baseline of 1.1% growth), as well as our 2026 forecast to -0.2% (0.1 ppt below March).