Canada's Economy Shows Resilience Amid Tariff Tensions

Canada's economy expanded by 2.2% in the first quarter, bolstered by exports ahead of U.S. tariffs. Despite growth, increased imports and lower domestic demand reveal underlying struggles. Economists predict sustained tariff impact, affecting future economic performance as the central bank prepares for a crucial interest rate decision.

In the first quarter, Canada's economy outpaced expectations with a 2.2% growth driven largely by brisk export activity. This surge occurred as U.S. companies accelerated purchases ahead of impending tariffs announced by President Donald Trump. However, the economy faced headwinds domestically, marked by a rise in imports, reduced household spending, and weaker final domestic demand, signaling potential challenges ahead.

Statistics Canada reported this economic performance ahead of the Bank of Canada's interest rate decision. The figures have heightened speculation about potential rate moves, with currency swap markets predicting an 82% probability of a rate hold. Current rates stand at 2.75%, amidst Trump's tariff strategies affecting trade dynamics with the United States.

March saw a 0.1% GDP increase following a 0.2% decline in February, with significant contributions from the mining and construction sectors. Speculation persists over how ongoing tariffs might influence overall growth as petroleum and machinery exports buoy the economy. The Canadian dollar and government bond yields responded positively to the release of this data.

(With inputs from agencies.)