Canada’s economy is smoking. The small business confidence index collapsed nearly 60% in just a few months. That’s not a typo. Even at the lowest point of the 2008 financial crisis, confidence was 10 points higher than it is now. Things are falling apart. And no one even cares about sugarcoating it.
My confidence is crashing faster than during the lockdown in March 2020. By early 2025, the emotions of small businesses had already begun to slip. However, when the trade war with the US began, it fell to 25. This is the lowest reading ever recorded. Nothing else approaches.
Consumer trust collapses as it kills inflation and housing demand
Meanwhile, consumer sentiment in Canada has reached an all-time low. In the US, consumer trust is also a bad thing, but Americans are three times more optimistic than in 2008. In Canada, it’s under 15 points during its global meltdown. That’s record low. And it’s dragging everything else with it.
Economic turmoil is beginning to turn Canadian politics upside down. On February 16, the Liberal Party had a roughly 1% chance of winning the most seats in Parliament. That’s not an exaggeration. But now? They have an 89% chance of taking the lead. This is one of the biggest election reversals ever seen.
Just two months ago, the liberals were predicted to grab 35 seats. The conservatives were on track to grab the 236. Currently, the figures are 178 for liberals and only 131 for conservatives, indicating a complete inversion. It condemns the economy.
The trade war is ripped into something that has almost left me confident. Tariffs are brutal to Canada and everyone knows it. Imports from Canada only make up 14% of what the US purchases. However, on the contrary, the US accounts for 78% of Canada’s exports. It’s not a trade relationship. It’s dependence. In 2023, Canada exported $700 billion in CAD to the US
Meanwhile, the Plone-to-Plone trade was only $532 billion. Canada trades with one foreign country more than itself. It’s not surprising that tariffs are destroying things.
But before tariffs appeared, confidence was already weakening. Since 2020, Canada’s population has grown by more than 9%, but the actual GDP per worker has dropped by 2%. At the same time, home prices have risen 300% since 2000.
The tariffs did not cause this confusion, but it could be the final blow. The housing shortage in Canada is so bad that people don’t want prices anymore. The country operates a structural deficit of 250,000 housing units per quarter. It’s a complete crisis. Although housing openings have been declining since 2021, demand has doubled. People literally don’t know where they should live.
Inflation rebounds, businesses cut spending and jobs
The US inflation outlook is useless. Americans now expect inflation to reach 6.0% next year. This is the best since May 2023. Long-term inflation expectations in the US reach 3.9%, the highest in 30 years. And Canada is not immune.
In February, Canada’s CPI jumped from 1.9% to 2.6%, or 1.1% per month. The forecast was 2.2% year-on-year and 0.6% on the moon. The reality has been much worse. Also, these figures do not even include the full impact of retaliation fees.
Give it a few more weeks, and Canada’s inflation could easily blow 3%. All of this is flat wages, housing is affordable, businesses are hitting the brakes all.
According to the Bank of Canada, “The tariff threat is already affecting financial markets and business decisions.” The Monetary Policy Report in January implemented multiple scenarios.
In the baseline case, which is a 25% US tariff, along with Canada’s retaliation, Canada’s GDP is expected to be 2.5 points in the first year, 1.5 points in the second year, and flattened in the third year. That’s economic zero growth over three years.
Another Canadian bank report looked at how workers and businesses respond to trade tensions. People plan to spend less because they are concerned about their work and their financial health.
Sectors such as oil, mining, manufacturing and agriculture have been hit hardest. These jobs are directly linked to exports and are tariff sensitive. Workers in these industries are preparing for layoffs.
The report, released on March 12, showed that businesses are preparing to cut jobs, cut investments and raise prices in response to tariffs. Simple English: Decline in jobs, lower growth rates, increased inflation. The report also said “inflation expectations are rising.” There’s no surprise.
Meanwhile, the Canola industry in Canada is walking straight into the talks. Starting March 20, China has hit Canadian canola oil and diet with 100% tariffs. In addition, the US may slap 25% tariffs on Canadian canola starting April 2nd. This lies on a new wave of Trump’s aggressive trade policy.
Saskatchewan, Alberta and Manitoba have sought federal assistance, particularly for farmers. But so far? there is nothing. There is no assistance. There is no relief. Just tariffs and silence.
So let’s run the full list: low consumer trust, massive trade wars, housing shortages, who repairs, GDP per worker down, inflation bounces violently, governments are trying to understand how hell suddenly wins elections.
“People are afraid to spend, are worried about their jobs, and businesses are responding to layoffs and price hikes,” a researcher at the Bank of Canada said. “We’re watching real economic activity fall apart.”
Confidence numbers don’t lie. The number of inflation does not lie. The number of transactions is not lying. This is not a soft landing. It’s a crash.
Canada is deep in its depths. Whether they call it a recession.
