Canada’s Economy Shows Growth in Late 2024 Amid Looming U.S. Tariff Threats

Canada’s economy posted solid growth in the final quarter of 2024, with Gross Domestic Product (GDP) rising by 0.6%, according to new data from Statistics Canada. However, uncertainty lingers as the country braces for potential economic fallout from U.S. President Donald Trump’s impending tariffs.

The fourth-quarter GDP growth outpaced the 0.5% increase seen in the third quarter, with household spending emerging as a key contributor. Spending by Canadian households jumped by 1.4%—the most substantial quarterly gain since Q2 2022—driven by purchases of new trucks, vans, and SUVs, alongside higher expenditures on rent, telecommunication, and financial services.

Residential construction also showcased robust performance, with a 3.9% rise in the fourth quarter of 2024—the highest since early 2021. The construction sector’s resilience is a positive indicator for the housing market, which has faced volatility in recent years.

Canada’s export sector, which is now at risk of being impacted by U.S. tariffs, showed promise in late 2024. Exports of goods and services rose by 1.8% in the fourth quarter, contributing to an overall annual increase of 0.6%. Notable gains came from crude oil, bitumen, travel services, and pharmaceutical products.

However, this progress could be threatened by the U.S. administration’s trade policies. Trump’s proposed tariffs, expected to take effect next week, have sparked concerns among economists and industry leaders.

Bank of Canada Governor Tiff Macklem cautioned against the potentially severe consequences of broad-based tariffs. “In the pandemic, we had a steep recession followed by a rapid recovery as the economy reopened,” Macklem said last week. “This time, if tariffs are long-lasting and broad-based, there won’t be a bounceback.”

Macklem emphasized that while some recovery might be possible, the economic damage could be prolonged. Economists believe that sectors such as automotive, agriculture, and manufacturing could be particularly vulnerable to the tariffs.

With the Bank of Canada set to review its economic strategy in light of potential trade disruptions, all eyes are on Ottawa’s response to maintain stability and growth.