The International Monetary Fund (IMF) has significantly downgraded Canada’s economic growth forecast for the next two years, citing the impact of U.S. tariffs. The IMF now projects Canada’s GDP growth at 1.4% in 2025 and 1.6% in 2026, down by 0.6 percentage points and 0.4 percentage points, respectively. This represents a notable setback for Canada’s economic outlook, primarily due to tariffs on Canadian exports imposed by the U.S.
Tariffs and Global Trade Uncertainty
The IMF blames the downward revision on new U.S. tariffs, which took effect in March, as well as increased uncertainty in global trade. The tariffs have created a challenging environment for Canada, which is heavily reliant on trade with the U.S. The IMF notes that Canada’s growth forecast for 2025 stands out as one of the most significant downward adjustments in the report, reflecting the negative impact of U.S. trade policies.
Global Economic Impact and U.S. Growth Projections
Alongside Canada, the IMF also downgraded growth projections for other major economies. The U.S. economy is expected to grow by 1.8% in 2025 and 1.7% in 2026, a reduction from previous forecasts. Global growth is projected to slow, with the IMF cutting its global growth forecast to 2.8% in 2025, down from earlier expectations of 3.3%. The IMF warns that the unpredictable nature of U.S. tariffs is adding to global economic uncertainty, making it difficult to predict long-term growth trends.
Canada’s Response to Tariffs
In response to U.S. tariffs, Canada imposed $60 billion worth of tariffs on U.S. goods, escalating trade tensions. The IMF estimates that these tariffs have raised costs for Canadian goods by about 15 percentage points compared to previous rates. Over the long term, the IMF expects both Canada and the U.S. to suffer significant declines in exports, further stunting economic growth.
Long-Term Consequences of Tariff Policies
The IMF warns that the full impact of the tariffs may be felt in the long run. It predicts that Canada and Mexico could see a drop in exports by as much as 6% under the current tariff conditions. While the short-term effects of the tariffs are already apparent, the IMF suggests that the medium- and long-term consequences could be even more damaging to global trade and economic stability.
Need for International Cooperation
The IMF’s report emphasizes the importance of global cooperation to mitigate the damage caused by tariffs. It urges policymakers to balance trade policies with broader economic stability to avoid further disruptions to global trade. As Canada faces these challenges, it must navigate the turbulent trade environment and work towards a recovery from the adverse effects of U.S. tariffs.
