{"id":3335,"date":"2025-09-11T16:11:31","date_gmt":"2025-09-11T16:11:31","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2025\/09\/11\/tariffs-sting-but-wont-derail-north-american-growth-outlook\/"},"modified":"2026-03-31T19:23:23","modified_gmt":"2026-03-31T19:23:23","slug":"tariffs-sting-but-wont-derail-north-american-growth-outlook","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/financial-markets-monthly\/tariffs-sting-but-wont-derail-north-american-growth-outlook\/","title":{"rendered":"Tariffs sting but won\u2019t derail North American growth outlook"},"content":{"rendered":"\n
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Highlights:<\/strong><\/h4>\n\n\n\n
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Evidence of economic damage from trade protectionism is piling up. Labour markets have softened in Canada and the U.S., although at a pace broadly in line with our previous assumptions.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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We still think there are reasons to be optimistic about Canada\u2019s economy. Odds of additional easing from the Bank of Canada have risen but, in a close call, we do not expect further reductions.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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In the U.S., a shift in tone from the Federal Reserve prompted by softening labour markets means interest rate cuts are likely to come sooner than we expected.<\/p>\n<\/div>\n<\/div>\n\n\n\n

Issue in focus:<\/strong><\/h4>\n\n\n\n
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Product specific tariffs are having a significant and negative impact on targeted sectors of the Canadian economy, despite the CUSMA compliant exemptions that protect the bulk of Canadian exports to the U.S. We take a closer look at the sectors under pressure, and how badly they\u2019re hurting.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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Forecast changes:<\/h2>\n\n\n\n

Economic data is increasingly showing the sting from tariffs. In Canada, we still think there are reasons to expect the worst of the drag from trade is likely behind us<\/strong>.<\/strong><\/strong><\/p>\n\n\n\n

For one, the impacts from tariffs on the economy so far has been pronounced, but also highly concentrated in targeted industries. Manufacturing, transport and warehousing accounted for all job losses since spring, while resilient domestic spending still supports the rest of the economy.<\/p>\n\n\n\n

Reduced foreign demand for Canadian exports has been significant, and the main drag on GDP growth in the second quarter. But the decline was also entirely from tariffed goods (read more in Issue in focus below). Other exports to the U.S. that are mostly shielded by CUSMA exemptions actually held up well from last year.<\/p>\n\n\n\n

Indeed, the challenges facing the Canadian economy are sectoral and regional, and best served by fiscal support that\u2019s continued to ramp up. With all this in mind, we cautiously expect that further deterioration in the Canadian economy will be limited. More specifically:<\/p>\n\n\n\n