TORONTO – Trade tensions with the U.S. will likely mean a painful next few months for workers and the economy but could be short-lived, the Conference Board of Canada said in its latest outlook.
Canada could see some 160,000 people lose their job in the second quarter, pushing unemployment up to 7.3 per cent, while the economy could shrink at an annualized rate of 5.4 per cent in the quarter, the research group said in a five-year outlook.
The economic hit would come as tariffs lead to real exports falling by a third including over 50 per cent for automotive exports.
The U.S. however will also feel the effects of its trade hostility and see its economy shrink in the second quarter, and the Conference Board is forecasting tariffs could be lifted by July 1 to start a recovery in the third quarter.
“The silver lining is that we anticipate a swift recovery, provided the tariffs remain in place for only three months,” it said.
While the timeline is a big assumption given the uncertainty, ending tariffs by the third quarter could see employment returning to pre-tariff levels by the fourth quarter, the report said.
Under the scenario, the economy would bounce back in the third quarter and for 2025 as a whole the Conference Board sees it expanding by 0.9 per cent. The forecast is down from its outlook for growth of 1.5 per cent a few months ago before the tariff threat materialized.
Manufacturing, where about half of the job losses are projected, would face a longer recovery because of lingering uncertainty, leading to delayed expansions and hiring plans well beyond 2025, it said.
A combination of lower immigration and a wave of baby boomers retiring will lead to a shrinking labour pool to help push down the Conference Board’s unemployment forecast to 6.1 per cent in 2026 and 5.4 per cent for 2029.
The economy could see real GDP growth of 1.9 per cent in 2026, 2.1 per cent in 2027, and 2.2 per cent in 2028 and 2029 in line with its previous outlook.
This report by The Canadian Press was first published March 31, 2025.
