Canada's Economy Contracts 1.6% Amid Tariff Pressure

Canada's economy faced significant pressure in the second quarter due to escalating tariffs, according to analysts. The country's economic growth contracted by 1.6% on an annualized basis, slightly exceeding expectations but still within the range predicted by the Bank of Canada. The trade war has had a substantial impact on Canada's trade, with net exports reducing economic growth by 8.1 percentage points and curbing business investment.

However, there were some positive developments: household spending rebounded, and government expenditure contributed to economic growth. Despite the economic slowdown, the overall economic performance aligned with the Bank of Canada's projections. Therefore, the latest GDP data is unlikely to prompt the central bank to move closer to a rate cut in September.

The analyst emphasized that while the tariff increases have put pressure on the economy, other sectors, such as household spending and government expenditure, have shown resilience. This balanced performance suggests that the central bank may maintain its current monetary policy stance, at least for the near term.