Macroeconomic overview
Sections: GDP Growth Inflation
GDP Growth
Both the US and Canada face slower economic growth in 2025.
The US is impacted by new tariffs and trade uncertainties, leading to reduced investment, with this situation likely extending into 2026. Similarly, Canada's growth outlook for 2025 has been downgraded due to the impact of US tariffs and geopolitical tensions. A recovery is anticipated by mid-2026, contingent on renegotiated trade agreements.
US
In 2025, the US economy is projected to grow at a rate of 1.8%, lower than earlier forecasts and down from 2.8% in 2024.¹ This slowdown is primarily due to new tariffs and the resulting increase in trade barriers, creating uncertainty that is causing businesses and consumers to be more wary. This cautiousness has led to a slowdown in investment and spending. These factors are expected to continue affecting economic activity into 2026, with growth expected to remain low at 1.7%.¹
Despite these challenges, business investment is projected to increase by 3.4%, slightly lower than the 3.7% recorded in 2024. Should uncertainty begin to ease, business investment is projected to pick up, with growth reaching 6.3% in 2026.²
Canada
Canada's real GDP grew by 1.5% in 2024, showing modest signs of recovery after a slower second half of 2023.¹ This growth is supported by strong population increase, government spending, and anticipated interest rate cuts by the Bank of Canada starting in June 2025. However, the outlook for 2025 has been revised to 1.4%, primarily due to the impact of US tariffs on Canadian exports and rising global tensions.¹ This may affect exports, consumer spending and delay investment decisions. A recovery is anticipated by mid-2026, but the forecast remains uncertain due to ongoing political tensions.
Inflation
Inflation in the US and Canada has decreased from recent highs, with both countries expecting it to stabilize near target levels in the coming years. External factors like energy prices and global trade continue to impact inflation trends.
US
US inflation gradually declined from around 8% in 2022 to 2.95% by late 2024.¹ The earlier surge was driven by pandemic-related supply chain disruptions, strong consumer demand, rising energy prices, and a tight labor market. As supply chains improved and the Federal Reserve tightened monetary policy, inflation began to ease, supported by lower energy costs and falling goods prices.
In 2025, inflation is projected to rise slightly by about 4 basis points compared to 2024 due to continued price pressures in the services sector, an uptick in core goods prices (excluding food and energy) driven by higher import costs, and the impact of new tariffs on global trade.
By 2026, inflation is expected to move closer to the Federal reserve’s 2% target, reaching an estimated 2.47%, as supply chains normalize further, demand remains restrained, and broader economic conditions continue to stabilize.³
Canada
In 2022, inflation in Canada peaked at 6.8% which was the highest in decades. Since then, it has gradually come down, reaching 2.4% in 2024.¹ As the Bank of Canada begins to ease its monetary policy, inflation is expected to return to the 2% target range by early 2025 and settle around 2.1% in 2026 supported by an improved supply-demand balance and steady energy prices.¹
Sources
- IMF April 2025 Update
- United States Economic Forecast, Deloitte, March 2025
- The Road to 2% Inflation: Are We There Yet?, Federal Reserve Bank of St. Louis, February 2025
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