When the U.S. trade war erupted in February, Canada appeared vulnerable. Tariff threats loomed large, consumer confidence plunged, and economic headlines turned grim. Yet, just three months later, the narrative has shifted dramatically.
According to a new RBC report by chief economist Frances Donald and associate chief economist Nathan Janzen, Canada now faces the lowest average effective tariff of any major U.S. trade partner. Despite volatility, 86% of Canadian exports to the U.S. remain duty-free, and the average effective tariff stands at just 2.3%—up from zero, but still the lowest globally.
While manufacturing and employment have taken a hit—sales fell 2.8% in April, and the unemployment rate rose to 7%—the RBC team argues the overall economy has shown unexpected resilience. Consumer spending hasn’t collapsed, and job postings are stabilizing.
Canada retains crucial policy flexibility. The Bank of Canada has already slashed interest rates by 225 basis points since last year, and the federal government, despite high deficits, maintains one of the lowest debt levels in the developed world.
Meanwhile, rising U.S. isolationism is opening new opportunities. Canada’s strength in agriculture, energy, and critical minerals aligns well with the global economy’s pivot toward AI, data infrastructure, and defence.
The RBC report doesn’t downplay risks, but it reframes Canada’s position: battered, yes—but now better positioned for global trade and investment than it was at the trade war’s outset.
Swifteradio.com
