Canada: Recession concerns and USMCA talks – Rabobank

Rabobank strategist Molly Schwartz notes that Canada has entered a technical recession, with Gross Domestic Product (GDP) contracting for two consecutive quarters and missing expectations. Prime Minister Carney and Bank of Canada (BoC) officials downplay the downturn, while trade tensions and USMCA renegotiation loom. Schwartz stresses that sectoral tariffs and renewed terms with the United States (US) and Mexico will be critical for Canada’s economic outlook.

Technical recession and trade pressures

"While innovation in the US is so hot that the government is now pulling in the reins a bit, officials in Canada are turning a blind eye to sluggish growth."

"Last week it was announced that Canadian GDP shrunk by 0.1% in Q1 of 2026, marking the second consecutive quarter of contraction and signalling a technical recession."

"Bank of Canada Deputy Governor, Carolyn Rogers, has also brushed off the technical recession, saying that we need to “look past technical recession indicators” in favor of more leading economic indicators."

"But for some, the technical recession is a flashing red light, screaming that the current trade situation with the US is unsustainable and it’s time to sit down at the negotiating table."

"Prior to their sit down, LeBlanc sent a letter to both Greer, and Mexico’s economy secretary Ebrard, asking to see the USMCA renewed for another sixteen years, as the USMCA review is currently underway."