Canada’s economy grew 0.3% in May, coming in above expectations
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- Canada's GDP grew 0.3% in May, above economist forecasts, with Statistics Canada's advanced June estimate of 0.2% putting Q2 on track for annualized growth above 3%
- The Q2 pace exceeds the Bank of Canada's 2.5% projection and sits well above the United States' 1.5% Q2 expansion, after two back-to-back quarters of negative annualized growth earlier in 2025 sent Canada into a technical recession
- The Trump administration announced 50% tariffs on July 20 targeting industries concentrated in British Columbia, Ontario, and Quebec, set to take effect August 19 and covering roughly 5% of Canadian exports to the U.S., with less than three weeks for exporters to prepare
- Washington declined to extend the USMCA on July 1, pushing the continental trade pact into annual reviews and adding another layer of uncertainty for Canadian exporters
- The oil and gas sector posted the largest May gain, with Western Canada Select averaging US$83/barrel and Brent above US$100/barrel on Middle East conflict; rig drilling and maintenance work surged nearly 10% month-over-month
- The Trans Mountain pipeline entered apportionment for a second consecutive month in July — shipping requests exceeding physical capacity — limiting how much crude can reach premium Asian markets to offset tariff exposure
- BMO Capital Markets chief economist Douglas Porter said the May data gives the Bank of Canada evidence the economy is adapting to trade uncertainty, but BMO still expects the central bank to stay on hold this year
Why it matters: Canadian exporters have under three weeks before 50% U.S. tariffs take effect August 19, hitting ~5% of exports and BC/Ontario/Quebec industries just as the economy finally posted a Q2 rebound above 3%. The Bank of Canada is likely to stay sidelined despite the stronger data, per BMO's read of the print.
