Canada’s economic forecasters are warning that the country may be heading towards a recession this year, with three major banks predicting a decline in GDP for the second and third quarters of 2025. TD Bank, BMO, National Bank, and Deloitte all point to tariffs imposed by US President Donald Trump as a major contributor to the potential downturn.
According to these forecasts, Canada’s GDP is expected to shrink by 1-1.1% in the second quarter and 0.2-0.9% in the third quarter. This would meet the traditional definition of a recession, which involves two consecutive quarters of negative economic growth.
However, not all economists agree that a recession is imminent. Dalhousie University professor Lars Osberg says that GDP changes do not provide a full picture and that Canada may already be experiencing a recession. He points to rising unemployment, declining average income, and increased uncertainty caused by the trade war as contributing factors.
Osberg also warns that even if a new trade deal is reached with the US, the uncertainty created by Trump’s policies could still have a lasting impact on economic activity. “The impact of tariff uncertainty on investment is going to depress economic activity going forward,” he said.
Despite these warnings, some economists are more optimistic about Canada’s prospects. Concordia University senior lecturer Moshe Lander says that while an economic slowdown is possible, it does not necessarily require two consecutive quarters of declining GDP. York University associate professor George Georgopoulos agrees, citing recent trade deals with the UK as a positive development.
Overall, the outlook for Canada’s economy remains uncertain, and experts caution against making definitive predictions about the country’s economic prospects in 2025.
Source: https://www.bnnbloomberg.ca/business/economics/2025/05/23/is-canada-facing-a-recession-or-an-economic-slowdown