Most Canadians are expecting a recession to hit the economy in 2025, according a new Bank of Canada survey, as U.S. President Donald Trump’s tariffs rattle global markets and disrupt international trade.
On Monday, the central bank’s quarterly Canadian Survey of Consumer Expectations showed 67 per cent of consumers are anticipating a recession — a significant jump from 47 per cent last quarter.
Canadians said they are feeling more pessimistic about their job security and financial health while reporting a higher-than-average chance of missing a debt payment, the online survey conducted through February showed.
Central bankers attributed the results to “pervasive uncertainty” around the escalating trade conflict with America. During that time, Trump had announced and temporarily paused blanket tariffs on Canadian goods followed by Canada’s announcement of retaliatory tariffs.
“Concerns about job security have increased since last quarter because of the trade conflict,” the Bank of Canada wrote. “This is especially true for those working in sectors that are highly dependent on trade between Canada and the United States.”
Meanwhile, Canadians said they expect cost of living to worsen because of the tariffs. Consumers’ short-term inflation expectations rose in the first quarter of 2025 for the first time since 2022, according to the survey.
“Businesses and consumers are shifting in defensive mode,” TD economist Maria Solovieva said in a note to clients. “The pullback in consumer spending, which makes up 60 per cent of GDP, will add to the drag from weaker investment spending, though the full effect of tariffs and related uncertainty is unlikely to materialize until the second quarter.”
In the bank’s Business Outlook Survey, also released Monday, about a third of respondents said they expect a recession in the coming year. Many Canadian firms said they are delaying investment and hiring until the economic outlook improves.
Inflation expectations among businesses are also higher than last quarter as two-thirds of firms said their non-labour input costs would be affected by tariffs.
“Even before Donald Trump’s ‘Liberation Day’ announcements, Canadian businesses and households were wary of what was ahead,” wrote Desjardins economist Royce Mendes in a note to clients.
“That said, unlike a typical economic slowdown, both businesses and consumers expect higher inflation,” Mendes continued. “As a result of this, we expect the Bank of Canada to hold off on providing additional monetary easing next week.”
Solovieva, on the other hand, said the door for another cut this month remains open despite higher inflation expectations from both consumers and businesses.
The central bank’s next interest rate decision is set to take place April 16.
This is a developing story.
