Canada's GDP Resilience to U.S. Tariffs Appears to Be Fading, Says CIBC

08:56 AM EDT, 06/27/2025 (MT Newswires) -- The resilience that the Canadian economy was previously showing in the face of United States tariffs and related uncertainty appears to be fading, said CIBC after Friday's release of gross domestic product data.

April GDP posted a 0.1% month-over-month decline, which was two ticks weaker than the marginal increase alluded to by the advance estimate.

"Unsurprisingly," manufacturing was the largest drag on activity, followed by wholesaling, noted the bank. Increases in finance and public administration offered a partial offset, although the latter was driven by activity related to the federal election and, as a result, will be unwound in May.

The advance estimate for May pointed to a further 0.1% month-over-month decline in overall economic activity.

While these declines are only marginal and the economy is certainly not falling off a cliff, Q2 GDP is now tracking a modest 0.3% contraction, which is between the two scenarios the Bank of Canada laid out in its April Monetary Policy Report (0.0% and -1.3% respectively), added CIBC.

That's somewhat supportive of the bank's current call for a July interest rate cut, although upcoming employment and inflation data will be more important in determining whether policymakers feel comfortable making a move at that time.

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