Experts say Canada may already be in the early stages of a recession

What we know about the issues Canada is facing

Recession concerns are growing among Canadians as their country’s economy faces a variety of threats. However, Canada might already be in the early stages of a recession if a recent survey of economists by Bloomberg is to be believed. 

Rising unemployment and shrinking exports

Rising unemployment and shrinking exports from the ongoing trade war with the United States have many experts worried. Bloomberg discovered that among the economists it surveyed, most think Canada’s output will shrink over the next two quarters. 

Canadian output is expected to trend downward

Economists predict Canadian output will shrink by one percent on an annualized basis in the second quarter and 0.1% in the third quarter. They also believe inflation will run above the Bank of Canada’s target at 2.1% in the third quarter and 2.2% in the fourth. 

Trade issues will hit the labor market

Canada’s trade issues with the United States are also expected to hit the labor market, economist believe unemployment will jump to 7.2% in the second half of 2025 before it eases in 2026. 

Exports will drop by a lot this quarter

Economists believe exports will drop by 7.4% on an annualized basis during the current quarter. However, these estimates were a far cry from the surprisingly positive export figures for March 2025 Statistics Canada published in early May.

Tariff troubles decreased exports to the US

On May 6th, Statistics Canada released an overview of international merchandise trade data from March 2025 and found that Canadian exports to the US had decreased. However, the data also something positive as well. 

Exports to the United States dropped

Exports to the United States dropped by 6.6% in March 2025, the second time they had decreased. In February 2025, Canadian exports to the US declined by 5.4%, which makes sense considering both February and March corresponded with Trump's early tariff threats and impositions. 

Total exports only dropped slightly

However, despite the decline of exports to Canada’s largest, and most important, trading partner for two straight months, the country's total exports only decreased by 0.2% in March 2025. 

Canada found other trade partners

Statistics Canada noted in its report that total exports remained relatively high because the drop in exports to the United States was offset by an increase in exports elsewhere. 

A huge rise in exports elsewhere

Canada increased its exports to countries other than the United States by 24.8%, which suggested that Canadian businesses have easily found other trading partners to purchase their goods. Whether or not this trend will last is unclear, but the economists surveyed by Bloomberg were not very hopeful in their assessments of Canada's economic future. 

The second-largest jump ever recorded

Statistics Canada pointed out that the jump in exports to other countries in March 2025 was the second-largest percentage increase that the government agency has recorded. 

Imports from the US also decreased

March 2025 also saw Canadian imports from the United States drop by 2.9%. This may be a sign that Canada’s recent counter-tariffs on its closest trading partner are working.  

The results of Trump’s trade war

The outcome of Trump's first two months of tariffs saw Canada’s trade deficit drop from $1 billion in Canadian dollars in February 2025 to just $506 million in March 2025. 

A drop and Canada’s trade surplus

Canada’s trade surplus with the United States also dropped from $8.4 billion Canadian dollars in March. So it appears Trump is getting what he said he wanted—less trade between Canada and the United States. 

What will happen next?

Again, whether or not Canada will be able to continue to broaden its new trading partners and offset the losses imposed by Trump’s tariffs isn’t clear, but things are going well so far based on the official data.