There’s no denying it—Canada’s ongoing trade dispute with the United States has rattled nerves. Tariffs, uncertainty, and political brinkmanship have dominated headlines and shaken business and consumer confidence alike. But despite the gloom, a growing number of economists are now suggesting something surprising: things may not be as bad as they once seemed. In fact, Canada might come out of this stronger.
Let’s be clear—this doesn’t mean Canada is skating through unscathed. A modest recession is still in the cards, according to Deloitte Canada. They’re projecting a slowdown in the second and third quarters as the reality of tariffs begins to bite. Manufacturing is already showing cracks, and unemployment is expected to tick up to 7.3% by fall. That’s not insignificant.
But it could have been worse—much worse. As Dawn Desjardins, Deloitte’s chief economist, points out, early exemptions negotiated under CUSMA (Canada-United States-Mexico Agreement) helped Canada avoid the full brunt of U.S. tariffs. While steel and aluminum are still under pressure thanks to President Trump’s recent tariff hikes, the broader economy has managed to stay out of the deep end—for now.
RBC echoes this cautiously optimistic tone. Their recent report notes that despite the fear, the underlying data shows resilience. Canadian households, for instance, haven’t slammed the brakes on spending. Businesses are understandably cautious, but many economists believe investment will bounce back once there’s a bit more clarity on the trade front.
And there are reasons to believe that clarity is coming. Desjardins believes the current negotiations, while tense, are at least productive. She predicts that once the dust settles, we’ll see renewed business investment and economic recovery beginning in the latter half of the year—potentially accelerated by rate cuts from the Bank of Canada. RBC isn’t convinced rate cuts are necessary, citing the economy’s current “resilience.” But even they concede that the central bank has room to act if needed.
What’s especially promising is the broader shift this trade dispute seems to have triggered in Canadian policy thinking. Last week, Ottawa passed Bill C-5—legislation aimed at tackling longstanding interprovincial trade barriers and streamlining project development. For years, Canadian businesses have complained of red tape and sluggish infrastructure development. Now, it seems the trade war has forced the government to act.
This shift isn’t just about policy. It’s about confidence. Desjardins calls it a signal to business that Canada is finally ready to play on a stronger, more agile field. If Canada can follow through on this signal, it could lay the foundation for long-term gains in investment and productivity.
Even more encouraging is the opportunity this moment presents. With the U.S. market increasingly uncertain, Canada has a chance to pivot—to expand its trade relationships, build out critical infrastructure, and develop its resource sector, especially in critical minerals that power emerging industries like AI and defense. This won’t happen overnight, but the groundwork is being laid.
Of course, we’re not out of the woods yet. Reorienting supply chains takes time. Manufacturing provinces may still suffer in the near term. And no bill or budget line can erase the challenges overnight. But what’s emerging from the fog of this trade dispute is something Canada has sorely needed: a sense of purpose, a push to modernize, and a political will to back it up.
In the end, the trade war may prove to be the jolt Canada needed—not a catastrophe, but a catalyst. It’s not about escaping pain altogether; it’s about using this moment to build a more resilient, more competitive economy for the future.
And maybe, just maybe, that’s the real silver lining.
