Roughly one in three Canadian businesses now assume there will be a recession in this country over the next year, a Bank of Canada survey released Monday shows.
The Bank of Canada’s Business Outlook Survey is a summary of interviews conducted by the bank with business leaders from around 100 Canadian firms.
It forecasts a grim quarter ahead for the Canadian economy as business sentiment deteriorates amid widespread uncertainty caused by U.S. President Donald Trump’s trade conflict, with an impact on everything from sales to consumers to decisions around hiring and investment.
Global stock markets extended a severe plunge Monday, fuelled by fears that U.S. tariffs would lead to a global economic slowdown. Even some of Trump’s allies are raising alarms about the economic damage, and financial forecasts suggest more pain on the horizon for U.S. businesses, consumers and investors.
Billionaire Trump supporter Bill Ackman warned on Sunday about an “economic nuclear winter” while calling for a 90-day pause on tariffs.
The Bank of Canada’s survey said 32 per cent of Canadian businesses were planning ahead with the assumption that a recession will occur in Canada over the next year, up from 15 per cent over the past two quarters.
Around 40 per cent businesses said they expect lower sales growth in the next quarter, the survey said.
This is particularly true for Canada’s export sector.
Get breaking National news
For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.
“Outlooks for export sales growth are particularly weak, with firms expecting a sharp slowdown as US tariffs make Canadian goods more expensive in US markets,” the report said.
However, some firms said a strong ‘Buy Canadian’ sentiment could offset some of the losses from the U.S. market. Growth in Canada’s export sector could be sustained by strong demand in the U.S. for Canadian oil, gas and lumber, the report said.
Two-thirds of all firms said they were expecting input costs to be affected as a result of Trump’s tariffs. Most of them said they would have to raise the price of their product if input costs went up.
Canadian businesses are also putting investment and hiring plans on hold, while some are even scaling investment plans back this year.
This is in part due to rising cost of imported capital goods, fuelled by a falling Canadian dollar.
Businesses are also putting hiring on pause.
“Soft demand, tariff uncertainty and minimal capacity pressures mean few firms need to add staff. Instead, more firms than usual intend to keep their number of employees fairly flat over the coming year,” the report said.
A tariff is a tax on importers, which means U.S. importers pay Trump’s tariffs when they import tariffed foreign items. As a result of Trump’s tariffs, Canada has imposed roughly $60 billion in retaliatory tariffs as well as matching tariffs of 25 per cent on vehicles coming from the U.S.
But Canadian businesses are split on whether they will help their U.S. customers absorb the costs.
Half of the respondents said they don’t want to lose U.S. market access and will maintain their market share by sharing some portion of the tariff costs.
Half of them do not plan to do so.
While some businesses plan to pivot to other markets, they admit that challenges remain, including contending with new competition and the cost involved in bringing products to a new market.
“Commodity exporters cited strong US demand, lack of alternatives to their products, or low margins as reasons why they would not absorb tariff costs,” the report said.
© 2025 Global News, a division of Corus Entertainment Inc.
Read the full article here
