US tariffs are significantly higher than they were at the start of 2025, and US trade policy remains unpredictable. Inflation is near 2%, although underlying price pressures have picked up. With uncertainty about US trade policy still high, the outlook for the Canadian economy remains clouded.

Canadian economic activity has slowed considerably because of the trade conflict but is showing signs of resilience. While inflation is close to 2%, underlying inflation has risen to about 2½%.

With some new tariff agreements in place, the range of trade policy outcomes has narrowed. Nevertheless, the situation remains fluid and difficult to predict. Canada’s economic outlook therefore continues to be highly dependant on assumptions about how US trade policy could unfold.

Tariffs and trade uncertainty are expected to weigh on Canadian economic activity for some time. Inflation remains close to the 2% target over the scenario horizon.

Global growth has slowed since the start of 2025 amid the ongoing shifts in US trade policy and the resulting uncertainty. Still, the global economy has remained resilient so far, even though US tariffs are at their highest levels in decades.

Considerable uncertainty surrounds the outlook for inflation. It is extremely difficult to predict how US trade policy will play out and how businesses, households and governments will react to a given level of tariffs. The outlook also faces risks that are not directly related to tariffs.