The leader of Canada’s largest trading partner has openly spoken about taking actions meant to coerce Canada into giving up its sovereignty, and has imposed economically damaging tariffs. That is a factor that must be considered when assessing Canada’s recent slip into recession.
In a post gloating over recent economic statistics showing Canada is in a recession, U.S. President Donald Trump revived his ’51st State’ rhetoric in a post that was shared by U.S. Ambassador to Canada Pete Hoekstra:
Trump’s ‘economic force’ remarks
In January of 2025, the U.S. President spoke of using ‘economic force’ rather than military force in response to a question of ‘annexing’ or ‘acquiring’ Canada. In his remarks, he referred to the border between Canada and the United States as an ‘artificial line’:
Through tariffs, some of which were ruled illegal by the U.S. Supreme Court, and some of which – steel and aluminum for example – have caused significant harm to the respective sectors targeted, are a clear headwind for Canada’s economy given that the U.S. is by far our largest trading partner. Those tariffs were imposed by the U.S. as part of both Trump’s broad opposition to the concept of free trade and his zero-sum worldview, and his desire to weaken Canada as part of the ‘economic force’ based annexation rhetoric noted above.
Canada’s economic numbers in context
In Q4 of 2025, the Canadian economy contracted by 0.246%. In Q1 of 2026, the Canadian economy contracted by 0.036%. Two consecutive quarters of negative growth meet the definition of a recession. At the same time, Canada’s per capita GDP rose 0.2% and has been trending upward:
The last line there, “even if the economic pie is getting a touch smaller, the average person is getting a bigger piece of it,” is worth noting as it points to a small rise in the standard of living of the average Canadian.
Further, given that a GDP drop of 0.036% in Q1 of 2026 means Canada just barely entered into a recession, we can realistically infer that in the absence of U.S. tariffs, Canada’s economy would have grown, and we would not be in a recession at the present time.
Finding new trade partners
In the face of U.S. tariffs, Canada has been seeking new trade partners, and those efforts have shown some promise. For example, Canada’s aluminum exports to the European Union rose 276% last year in the face of 50% U.S. tariffs on the sector. Combined with other long-term-focused moves like a more supportive approach to the oil and gas sector, the expansion of the CAF, and federal openness to the AI sector, the deeper cultivation of reliable trading partners can create the foundation for long-term growth even in the face of short-term setbacks and negative interventions from the U.S. Administration.
Spencer Fernando
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