Economic growth in Canada is projected to slow as global trade tensions continue to affect business confidence, investment, and hiring, according to a new report from AM Best.
The report highlighted that uncertainty surrounding tariff negotiations and shifting trade policies is creating challenges across industries, including insurance.
Although Canada’s economy showed resilience earlier this year, this strength was largely driven by accelerated trade activity as companies moved to ship goods before new tariffs took effect. The boost was temporary, with exports and imports both surging ahead of implementation, leading to a short-term buildup in inventories.
AM Best director Ann Modica said that outside of trade and government spending, other areas of growth were weak. Consumer demand slowed as labour market conditions softened and population growth decelerated.
The report noted that the economic impact of tariffs has been significant. Canadian exports to the US fell by more than 15% in April 2025, compared with the previous month, marking a third straight decline. Export volumes are now over 25% below their January peak.
The Bank of Canada's latest survey also showed that households are becoming more cautious about spending amid job insecurity and rising living costs. As a result, discretionary spending has fallen, with consumers focusing on essential goods and services.
Meanwhile, tariff negotiations remain ongoing. While the United States-Mexico-Canada Agreement (USMCA) continues to provide tariff exemptions for many products, the U.S. raised its general tariff rate to 35% in August 2025 for goods outside the agreement. In addition, a 40% transshipment duty now applies to products found to be avoiding tariff obligations.
The slowdown in trade and consumption is expected to have downstream implications for Canada’s insurance sector, particularly in commercial lines linked to manufacturing, logistics, and trade. Reduced business activity and investment could weigh on premium growth and expose insurers to greater economic sensitivity in the months ahead.
