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\t\t\t\t\tEight charts that defined Canada\u2019s economy in 2025\n\t\t\t\t<\/p>\n
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It was a tumultuous year for the Canadian economy\u2014marked by trade volatility, policy pivots, and a fundamental shift in the economic landscape.<\/p>\n
Canada found itself navigating a markedly different path than anticipated at the start of 2025. Tariff uncertainties escalated globally with geopolitical tensions testing longstanding trade relationships, and immigration policy undergoing significant reform.<\/p>\n
Yet amid these headwinds, the Canadian economy demonstrated surprising resilience. CUSMA protections shielded most Canadian exports, while the Bank of Canada\u2019s interest rate cuts, fiscal support, and a recovery in household balance sheets helped sustain consumer spending through significant uncertainty.<\/p>\n
We\u2019ve seen early signs that make us cautiously optimistic<\/a> for Canada\u2019s outlook in 2026, barring any external shocks. Though, distinct regional challenges, softness in the housing market, and a demographic slowdown remain headwinds ahead.<\/p>\n In hindsight, we look back at some of the key charts and research that helped shape our thinking throughout 2025.<\/p>\n Canada fared better-than-expected largely due to CUSMA<\/p>\n Sector specific U.S. import tariffs have had a significant impact on some industries (motor vehicle and parts production, steel and aluminum among others), but an exemption from most tariffs for products compliant with CUSMA trade has kept most Canadian exports duty free.<\/p>\n The average effective tariff on U.S. imports from Canada has been the lowest<\/a> of any major U.S. trade partner in 2025\u2014a key contributor to Canada\u2019s resilience.<\/p>\n Targeted tariffs creates diverging regional outcomes<\/p>\n Targeted sector-specific U.S. tariffs have created distinct regional challenges across Canada.<\/p>\n Manufacturing-focused<\/a> Ontario and Quebec have, so far, borne the brunt of the impact, while resource-heavy provinces have faced less exposure. But, Chinese tariffs on agricultural exports have posed headwinds. This uneven tariff exposure has positioned provinces for significantly diverging outlooks<\/a> heading into 2026.<\/p>\n Consumer spending remains resilient amid uncertainty<\/p>\n Consumer spending has been a bright spot<\/a> in a year of heightened trade uncertainty, slowing population growth and rising unemployment\u2014underpinning growth.<\/p>\n We think relatively lower U.S. tariff hikes on Canada versus other trade partners,\u00a0earlier BoC rate cuts, limited broad-based layoffs, and robust equity valuations are driving spending. They have supported a recovery in household balance sheets from higher debt servicing costs in prior years.<\/p>\n Canadians changed their travel plans<\/p>\n The travel sector was in recovery mode through late 2023 and 2024 after the pandemic, but the pattern reversed sharply in early 2025 as trade uncertainties peaked.<\/p>\n There wasn\u2019t simply a pullback in overall travel\u2014but a meaningful change in Canadian preferences<\/a> with more opting to travel to destinations outside of the U.S.<\/p>\n Weaker business investment risks extending underinvestment<\/p>\n Trade-related uncertainty weighed heavily on business investment in 2025, creating challenges for investment and hiring decisions.<\/p>\n Canada\u2019s jobs market has shown signs of improvement<\/a> in recent months, but the uncertainty stemming from trade policy risks extending a decade of business underinvestment\u2014a key contributor to the country\u2019s lagging productivity growth. \u00a0<\/p>\n Condo developers\u2019 drought worsened in biggest markets<\/p>\n Pre-construction apartment sales barely had a pulse in the Greater Toronto Area<\/a>, down about 90% from the average over the nine years prior to 2024. A broadly similar story unfolded in Vancouver.<\/p>\n This spells trouble for housing construction in 2026, and beyond. We expect housing starts will fall more than 10% nationwide\u2014and, even more so in 2027\u2014despite concerted policy efforts to boost supply.<\/p>\n Immigration policy shift puts damper on demographic growth<\/p>\n Canada\u2019s population growth moderated sharply, rising just 0.3% quarter-over-quarter annualized in Q3 2025 \u2013 the slowest pace on record outside the pandemic.<\/p>\n The slowdown stems from declining temporary resident arrivals and an uptick in outflows, aligning with recently announced targets<\/a> set out in the federal government\u2019s immigration plan. We expect a continued reduction in the number of non-permanent residents will cause population growth to stall in 2026.<\/p>\n Big year for a fiscal pivot<\/p>\n There was a steep ramp up in defence spending<\/a> with FY 2025-26 marked as the year we are finally \u00a0projected to hit the 2% of GDP NATO target, just as the alliance\u2019s conversation shifted towards plus 3.5%.<\/p>\n Canada is only at the beginning of digesting its implications, including the fiscal hit. Defence was the largest single item in the recent blockbuster federal budget<\/a>, and there are still questions around how to deploy the big new spending, along with its impact on growth.<\/p>\n \n\t\t\t\t\t\tDisclaimer<\/a>\n\t\t\t\t\t<\/p>\n This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. The reader is solely liable for any use of the information contained in this document and Royal Bank of Canada (\u201cRBC\u201d) nor any of its affiliates nor any of their respective directors, officers, employees or agents shall be held responsible for any direct or indirect damages arising from the use of this document by the reader. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.<\/p>\n This document may contain forward-looking statements within the meaning of certain securities laws, which are subject to RBC\u2019s caution regarding forward-looking statements. ESG (including climate) metrics, data and other information contained on this website are or may be based on assumptions, estimates and judgements. For cautionary statements relating to the information on this website, refer to the \u201cCaution regarding forward-looking statements\u201d and the \u201cImportant notice regarding this document\u201d sections in our latest climate report or sustainability report, available at: https:\/\/www.rbc.com\/community-social-impact\/reporting-performance\/index.html<\/a>. Except as required by law, none of RBC nor any of its affiliates undertake to update any information in this document.<\/p>\n","protected":false},"excerpt":{"rendered":"Eight charts that defined Canada\u2019s economy in 2025 It was a tumultuous year for the Canadian economy\u2014marked by…\n","protected":false},"author":2,"featured_media":362360,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":{"0":"post-362359","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/362359","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=362359"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/362359\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/362360"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=362359"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=362359"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=362359"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}