Canada: Trade noise and macroeconomic uncertainty – TD Securities

TD Securities analysts note that changes in trading conditions will not dramatically alter Canada's growth outlook, pointing to manufacturing's small GDP share and pre-existing investment weakness. They highlight that interminable CUSMA talks and the geopolitical environment increase uncertainty, but rising energy prices offer an offset by pushing back rate cut expectations.

Energy prices offset despite CUSMA uncertainty

"As much as we are keeping on top of all the to and fro's of the Canada-US negotiations, we can't help but feel that – barring a material change in the relationship - incremental changes in trading conditions aren't going to alter the broader growth outlook. Manufacturing makes up less than 10% of Canadian output, and has held up better than feared through the first year of the trade dispute. Uncertainty is weighing on investment intentions, but business investment was already a sore spot in the Canadian economic picture prior to the trade disruptions."

"The Canadian economy finds itself caught between competing narratives. Interminable CUSMA negotiations reinforce underlying (and often exaggerated) fears around the health of the broader economy. The recent surge in energy prices has provided somewhat of an offset in sentiment terms, removing most of the cut pricing in the front-end in Canada."

"Governor Macklem has cut a nervous figure in 2026, taking great pains to emphasize that uncertainty is high, and all options are on the table when it comes to future policy decisions. We'd suggest that the rapidly deteriorating geopolitical environment is not going to lessen the pervasive sense of uncertainty."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)