Canada’s economy flatlines amid trade war pressure and weak investment

Canada’s economy stalled in the first quarter of 2026, though several economists say the country may not yet be in a recession despite back-to-back declines in real GDP.

According to Statistics Canada, real gross domestic product fell at an annualised rate of 0.1 per cent in the first quarter after a revised one per cent decline in the final quarter of 2025.

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The weaker-than-expected result fell far short of economists’ forecasts for 1.5 percent growth and has intensified concerns about the impact of trade tensions and slowing investment.

TD Bank economist Marc Ercolao said the economy had struggled but added: “Don’t get me wrong, the economy has struggled to gain any meaningful traction over the last year ... but for now, we wouldn’t necessarily call it a technical recession.”

BMO chief economist Doug Porter also said there was “no sense sugar-coating this sour result”, while adding: “While there will be plenty of debate over whether this constitutes a recession (we would say ‘no, not really’), there is little debate that the economy has struggled to make any headway over the past year amid the ongoing trade conflict.”

Statistics Canada blamed weak construction activity and lower resource extraction for March’s decline.

Economists say uncertainty linked to US tariffs and the Iran war continues to weigh on business investment and growth prospects ahead of the Bank of Canada’s next rate decision on June 10.