Canada’s GDP surge runs into tariff and bond market headwinds
Exports did the heavy lifting, rising 3.6% on the quarter. It’s the sharpest gain since Q1 2023, largely on a rebound in auto production after two soft quarters. Business investment also picked up, with residential construction and machinery spending both higher.
The composition was uneven underneath that. Real GDP by industry rose 3.6% annualized for the quarter as a whole, but June’s monthly detail shows where the strain was building. Goods-producing industries contracted 0.1% that month as mining, quarrying and oil and gas extraction cooled after carrying growth earlier in the year. This was an effect offset by a 0.4% gain in services.
Corporate profits told a more lopsided story still: they jumped 9.6% on the quarter, the biggest increase since early 2021. The energy sector doing most of the work while manufacturers, squeezed by energy costs, lagged behind.
Where markets already were before the data hit
By the time Statistics Canada published the number, the bond market had already done its own repricing. Canada’s 10-year yield touched a more than two-year high of 3.76% on August 21, after trade talks broke down. Canada had imposed retaliatory tariffs of 15% to 50% on roughly $20 billion of US imports, spanning metals, agricultural goods and motorcycles.
The yield then retreated to about 3.62% as trade-related recession worries briefly took hold. It climbed back to 3.72% by the GDP release date, still elevated, as traders weighed a stronger-than-expected growth number. That came against a White House pledge to raise tariffs on Canadian autos, trucks, parts and steel to 50% starting January 1, 2027.
