A new report by the International Monetary Fund says the Canadian economy has held up better than expected under the trade shock from U.S. tariffs.
The report says the impact of the trade dispute was mitigated by exemptions under the free trade agreement between Canada, the United States and Mexico, but employment and investment have still weakened.
It says lower commodity prices, softer external demand, slowing immigration and tariff uncertainty have added to the drag.
Looking ahead, the IMF says a risky outlook has become more balanced than earlier in the year, but uncertainty is expected to remain high.
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The report, which is part of the IMF’s regular review of the Canadian economy, says the federal government’s budget rightly pivots toward higher public investment, though it says a clear debt-to-GDP anchor should remain central to Canada’s fiscal framework.
It says fiscal policy should continue to be measured, counter-cyclical, and flexible.
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