Canada is heading towards its third — possibly fourth — year of sub-two per cent economic growth, say analysts with Farm Credit Canada (FCC). That, combined with ongoing U.S. and Chinese tariffs, will have an impact on Canadian agriculture.
Why it matters: Canadian farmers are facing uncertain markets and a squeeze to grain farm profits.
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At FCC’s 2025 economic update webinar Sept. 18, FCC executive vice-president J.P. Gervais pegged overall economic growth in 2025 at 1.1 per cent — just shy of the Bank of Canada’s 1.3 per cent forecast. FCC estimates one per cent growth in 2026, virtually in line with Bank of Canada estimates.
Both forecasts represent less growth than in 2023 and 2024, which saw economic growth of 1.5 and 1.6 per cent, respectively.
“If you think of 2 per cent as the potential of the economy, we’re really going under the speed limit,” said Gervais, who placed much of the blame on tariffs but did not discount other “underlying issues” for their roles in a softening Canadian economic outlook.
Gervais urged producers not to get too comfortable with agri-food’s almost universal lack of exposure (97 per cent of food can still pass the U.S. border tariff-free) thanks to inclusion under the Canada-U.S.-Mexico trade agreement.
However, a lot of confusion around U.S. tariffs remains on both sides of the border.
“Even on the U.S. side, lots of customers are telling us that their sales are being taxed and that they actually shouldn’t be because they are compliant. They’ve gone through the process of proving their compliance with CUSMA,” Gervais said.
“Second of all, there’s also uncertainty with regards to what is going to happen in the future. And with uncertainty comes kind of a little reluctance on the part of businesses to invest in their business, just waiting to see how policy is going to evolve on the U.S. side.”
A significant chunk of of Canada’s exports are non-exempt products such as lumber, steel and aluminum.
“All of that does have an impact on the economy. And then we got the second quarter GDP estimate, and it came negative.”
That said, Gervais pointed to the Building Canada Act, intended to fast-track the building of Canadian infrastructure, as a “great first step” that will reverberate across industries, including agriculture.
“We’re talking about more infrastructure. And if you’re thinking about investment in ports, rail, roads, all of these can actually have some significant positive spillovers in the rest of the economy, making it easier for businesses to do business and to invest and sell and develop markets and so forth,” he said.
“Even defence spending, to some extent, is a positive can have a positive spillover.”
However, all of that is going to take time. During that time, it will be up to the Bank of Canada — which Gervais praised for its Sept. 17 overnight rate reduction of 25 basis points — to find ways to reignite the country’s economy, he said.
To that end, Des Sobool, deputy chief economist at FCC, forecasts the central bank will cut interest rates by another 50 basis points by the end of 2025.
“This is really in response to a slowing economy,” said Sobool.
“The Bank of Canada doesn’t want a recession to happen … but we see the economy (and) how poorly it’s performing.”
Watch for more coverage of FCC’s Sept. 18 economic forecast.
