New economic data coming on Friday is set to give the clearest picture yet of how hard U.S. tariffs and the trade war hammered the Canadian economy for the full year of 2025.
That comes as uncertainty continues to dominate most predictions for 2026 and amid a new round of 10 per cent U.S. tariffs on countries around the world that went into effect on Tuesday after previous global tariffs imposed by U.S. President Donald Trump early in 2025 were struck down on Feb. 20.
December’s report on gross domestic product (GDP) will be released by Statistics Canada on Friday, and will give a summary of the final quarter of 2025, offering insight into the full scope of the economic impacts for the year.
Royal Bank of Canada released a report on Feb. 20 outlining predictions for the GDP report. It was authored by RBC’s assistant chief economist Nathan Janzen and senior economist Claire Fan.
“International trade uncertainty and volatility has been a persistent feature in the growth backdrop over the last year, but we expect a flat Q4 gross domestic product reading for Canada next Friday [Feb. 27] was in part due to temporary disruptions in the economy with signs of stronger activity late in the quarter,” the report said.
Despite some positive signs within a few of the previous GDP reports, RBC says, “still, soft spots remain.”
GDP is measured by adding the value of all goods and services produced within a country during a given period.
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In November, GDP showed zero per cent growth from October, when GDP fell 0.3 per cent.
December’s GDP report will conclude the fourth quarter of 2025.
RBC’s report is somewhat optimistic for the results expected to be released on Friday, and forecasts that GDP in the month will be up by 0.2 per cent.
“The silver lining to a soft looking quarter is that most of the weakness was concentrated in October and November with industry reports for December mostly positive,” the RBC report said.
“Following two soft growth prints in October and November, we expect a 0.2 per cent increase in December that would be slightly above Statistics Canada’s 0.1 per cent advance estimate. That would leave Q4 tracking close to our (and the Bank of Canada’s) forecast for no growth after a 2.6 per cent annualized increase in Q3.”
The third quarter of last year saw GDP rise 2.6 per cent in the three months from July through September. This meant Canada avoided a recession, which economists define as two back-to-back quarters, or six straight months, where GDP drops.
When the September GDP report was released, the Canadian Chamber of Commerce warned that there were still concerns for the economy.
“Canada’s headline growth only looks good on paper — external conditions will continue to put pressure on the economy,” Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, said in a statement from November.
“We’ll need strong domestic demand to carry more of the load — it simply wasn’t there in third quarter GDP. Households and businesses are still holding back, and the economy hasn’t found the momentum it needs to shift into a higher gear.”
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