The Canadian economy is expected to grow moderately in the first quarter of 2025, according to the latest Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB). The report forecasts growth of 2.5% in the first quarter, following an increase of 3.2% in the final quarter of 2024.
“While the Canadian economy is projected to remain healthy at the start of the year, several uncertainties cloud the outlook, including potential US tariffs, the GST/HST tax break, and capital gains policy concerns,” CFIB chief economist and vice-president of research Simon Gaudreault said in a statement.
A potential 25% tariff on Canadian exports to the US could have widespread consequences for Canadian businesses. According to the report, 82% of businesses that trade with the US anticipate operational challenges if tariffs are imposed. These challenges could include higher inflation, increased prices, and a loss of customers.
Inflation stabilizing, business confidence rising
The report also showed signs of economic stability, with inflation expected to align with the Bank of Canada’s target of 2% year-over-year in the first quarter of 2025. This is a slight drop from 2.1% in the final quarter of 2024.
Private investment is also rebounding, supported by an increase in long-term business confidence. This marks a turnaround after weaker performance earlier in 2024. Job vacancies in the private sector remained steady, with 378,300 unfilled positions in the fourth quarter of 2024, representing a job vacancy rate of 2.7%.
Canadian businesses face tariff concerns
The looming US tariff threat has cast uncertainty over Canada’s economic outlook. Gaudreault noted that given the strong trade ties between Canada and the US, new tariffs could lead to rising inflation and additional struggles for small- and medium-sized businesses already grappling with weak demand.
“It’s critical to create conditions where small businesses can thrive as we navigate these challenges,” he said.
Optimism varies across sectors
The report revealed that while professional, business, and financial services sectors remain above the all-industry optimism average, they have become less optimistic in the past two years.
CFIB, which represents 100,000 small and medium-sized businesses across Canada, continues to advocate for policies that encourage economic growth and support small business success.
This article Canadian economy expected to slowly grow in 2025, despite Donald Trump tariff risks originally appeared on Money.ca
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