The spectre of Donald Trump’s return to the White House has sent shockwaves through Canada’s economic landscape, with new projections suggesting the nation could face negative growth in 2025 if threatened tariffs materialize. According to a sobering report released Thursday by the Canadian Federation of Independent Business (CFIB), Trump’s proposed 10-25% blanket tariffs on Canadian goods would drive GDP growth below zero, potentially triggering a recession that many businesses aren’t prepared to weather.
“We’re looking at a perfect storm of economic pressures,” says Corinne Pohlmann, Executive Vice-President at CFIB. “Our analysis shows that if these tariffs are implemented as threatened, Canada’s GDP could contract by 0.7% next year—effectively erasing any gains we’ve made in the post-pandemic recovery.”
The potential impact varies dramatically across provinces and sectors. Manufacturing-heavy Ontario and Quebec stand to lose the most, with projected GDP contractions of 1.2% and 1.0% respectively. Resource-dependent provinces like Alberta may face slightly less severe but still significant downturns, particularly if energy exports are included in the tariff regime.
Small businesses—the backbone of Canada’s economy—appear especially vulnerable. The CFIB survey indicates that 64% of small business owners haven’t developed contingency plans for potential trade disruptions, despite Canada sending approximately 75% of its exports to the United States.
“Most small businesses simply don’t have the margins or reserves to absorb a 10% price increase on their American-bound products, let alone 25%,” explains economist Dan Kelly. “We’re talking about businesses that are still carrying pandemic debt and now facing higher interest rates. These tariffs could be the breaking point for thousands of operations.”
The Bank of Canada finds itself in an increasingly precarious position. While inflation concerns had previously dominated monetary policy discussions, the central bank may now need to prioritize growth—potentially accelerating interest rate cuts to cushion the blow from trade disruptions.
“The timing couldn’t be worse,” notes former Bank of Canada analyst Patricia Croft. “Just as we’re getting inflation under control, these tariffs would essentially act as a new inflationary pressure while simultaneously destroying growth. It’s the economic equivalent of being caught between a rock and a hard place.”
For consumers, the outlook is equally concerning. Economic models suggest the average Canadian household could face $1,500-2,000 in additional annual costs as import prices rise and domestic competition diminishes. Industries from automotive to agriculture are scrambling to assess exposure and develop alternatives to U.S. markets.
The federal government has begun preliminary discussions about potential support measures, though fiscal constraints limit options. Finance Minister Chrystia Freeland has emphasized diplomatic channels remain the priority, while acknowledging contingency planning is underway.
“We’ve been here before,” Freeland stated at a recent press conference. “Canada has faced and overcome trade challenges with our southern neighbor in the past. We’re prepared to defend Canadian workers and businesses while maintaining our commitment to responsible fiscal management.”
As Canadian businesses and policymakers brace for potential economic headwinds, the message from economists is clear: diversification is no longer just desirable—it’s essential. The CFIB report concludes with an urgent call for businesses to explore new markets and supply chains regardless of the November election outcome.
“Whether these specific tariffs materialize or not,” Pohlmann emphasizes, “this situation highlights Canada’s economic vulnerability to U.S. policy shifts. The time to prepare alternatives is now, not after tariffs are announced.”
Will Canada’s economy prove resilient enough to withstand this latest challenge from its largest trading partner? The answer may define the nation’s economic trajectory for years to come.
