Economic activity in Canada is expected to slow as a result of headwinds from global trade tensions, generating uncertainty that has discouraged investment planning and impacted hiring decisions, according to a new AM Best report.

Despite persistent volatility generated by concerns over impending trade tariffs, Canada’s economy has shown signs of resilience during the earlier part of this year. The strength was largely reflected in accelerated trade activity, as businesses front-loaded exports and imports ahead of tariffs being implemented. Rising import volumes were largely offset by a surge in exports and a buildup of inventories.

“Outside of trade and government spending, other avenues of first quarter growth were relatively weak, said Ann Modica, director, AM Best. “Consumer demand remained subdued, reflecting softer labor market conditions and slowing population growth.”

The report notes that while the tariff negotiations remain ongoing and fluid, the impact on trade has been significant. Canadian exports to the United States fall by over 15% month-over-month in April 2025, marking the third consecutive monthly contraction, and were more than 25% below their January 2025 peak.

A recent survey by the Bank of Canada indicates that households are increasingly cautious about future spending with job insecurity and anticipated higher living costs weighing on consumer sentiment. Discretionary spending has declined as a result, with households focusing their spending on essentials.

Tariff negotiations remain ongoing and fluid. While the United States-Mexico-Canada Agreement (USMCA) provides tariff exemptions for a wide range of products, the United States raised the general tariff rate from 25% to 35% in August 2025 for goods not covered by USMCA provisions. Enforcement has also tightened, with a 40% transshipment duty applied to goods deemed to have circumvented tariff obligations.

AM Best will host an insurance market briefing on the state of Canada’s insurance industry at the Sheraton Centre Toronto Hotel on Thursday, Oct. 30, 2025. During the complimentary half-day event, AM Best analysts will deliver market insights and present overviews of Canada’s main insurance sectors, including discussion of emerging trends such as catastrophe losses, climate risk mitigation, cyber and artificial intelligence, and updates around the IFRS 17 accounting practices.

To register for AM Best’s Canada Insurance Market Briefing - Toronto, please go to AM Best’s Canada Insurance Market Briefing - Toronto.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=359260.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20251024223081/en/