Canada Economy Contracts 0.1% in April Amid Manufacturing Decline, Tariff Impact

Canada's economy contracted by 0.1% in April, driven primarily by a 0.6% decline in goods-producing industries, notably manufacturing, which fell 1.9%, marking its largest drop since 2021. This downturn has been largely attributed to ongoing U.S. tariffs imposed by President Donald Trump and economic uncertainty, which have adversely affected sectors such as transportation equipment manufacturing and wholesale trade. Despite modest growth in services, including finance and public administration, these gains were insufficient to offset declines in production and trade. Early estimates indicate another 0.1% GDP contraction in May, raising concerns about a weak second quarter and prompting warnings from the Bank of Canada about subdued growth, sluggish investment, muted hiring, and rising layoffs. The Canadian economy's heavy dependence on the U.S. market, especially in oil and gas, further complicates recovery prospects amid tariff tensions. Overall, the data signals increasing economic challenges for Canada as tariff impacts deepen and domestic demand softens.