EDITORIAL: Trade war shrinking Canada’s economy

The latest economic data from Statistics Canada is a reminder that Canadian prosperity depends on our economic relationship with the United States.

It’s all well and good for Prime Minister Mark Carney to travel around the world to solicit business from non-U.S. markets – indeed, we agree with that effort.

But the bottom line is that almost 70% of our trade is done with the U.S. and the negative impact on our economy from the ongoing trade war with the U.S. under President Donald Trump, is increasingly being felt in Canada.

On an annualized basis, Canada’s economy contracted by 0.1% in the first quarter of this year – far worse than a predicted increase of 1.5% – putting Canada into a technical recession, meaning two consecutive quarters of negative economic growth.

Canada’s economy has in fact contracted in three of the last four quarters.

In addition, business capital investment in Canada – a key measure of economic productivity – fell 0.7% in the first quarter of 2026, the fifth consecutive quarterly decline.

Some economists disputed the claim Canada is in an actual recession, as opposed to a technical one, since the decrease in GDP in the first quarter was so small and the preliminary findings could be revised upward when the final numbers are reported.

But there’s no disputing the latest data is bad news, confirming the underlying weakness of the Canadian economy more than a year after Trump launched his global trade and tariff war.

That includes the loss of 112,000 private sector jobs since the start of this year, with the unemployment rate now at 6.9%, compared to 6.5% in January.

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All of this points to the importance of the upcoming review of the Canada-U.S.-Mexico Agreement (CUSMA) on trade beginning July 1.

Unlike Canada, negotiations between the U.S. and Mexico have already started, with U.S. trade representative A Jamieson Greer warning both countries there will be new tariffs compared to the previously negotiated 2018 CUSMA agreement.

Continuing uncertainty about the outcome of these negotiations is contributing to the downturn in our economy because businesses want certainty on tariff and trade issues between Canada and the U.S. before making any investment decisions.

The longer this uncertainty goes on, the worse it will be for our economy.