Canadian economy to see reasonable growth in Q1 2025, tariff threat looms: CFIB

The Canadian economy is expected to grow moderately in the first quarter of 2025, finds the latest Main Street Quarterly report by the Canadian Federation of Independent Business (CFIB).

“Given a strong trade relationship between Canada and the U.S., a 25% tariff on Canadian products would likely drive inflation in Canada, causing price hikes and loss of customers, and heavily impact small- and medium-sized businesses already struggling with weak demand,” said CFIB’s chief economist and vice-president of research, Simon Gaudreault.

“While we forecast the Canadian economy will remain healthy in the first quarter of the year, the results don’t take into the account the looming U.S. tariff threat, the GST/HST tax break, uncertainty around capital gains, among other issues facing small businesses.

“It’s important now more than ever to balance the economic environment and create conditions where small- and medium-sized businesses can thrive and compete.”

The CFIB is Canada’s largest association of small and medium-sized businesses with 100,000 members across every industry and region.

Key highlights of the Q4 2024 edition of the Main Street Quarterly report

• CFIB’s estimates and forecasts in partnership with AppEco suggest the Canadian economy grew by 3.2% in Q4 2024 and will moderate at 2.5% in Q1 2025. The Q4 estimate for the total Consumer Price Index (CPI) inflation dropped to 2.1% in Q3 and should stabilize around the Bank of Canada’s target of 2% year-over-year in Q1 2025.
• Driven by an increase in long-term small business confidence, private investment rebounded in the last quarter of the year, and the pace is set to pick up in 2025 after a disappointing performance in 2024. 
• The Q4 2024 private sector job vacancy rate remained almost unchanged at 2.7% in Q4. This represents 378,300 unfilled positions.
• A special analysis this quarter focuses on the looming U.S. tariffs and their potential impacts. A strong majority (82%) of Canadian businesses—both exporters to and importers from the U.S.— expect significant impacts on their operations if new tariffs are imposed on Canadian products.
• The quarterly sectoral profile reveals that firms offering professional, business, and financial services, have become less optimistic in the past two years, but they still outpace the all-industry optimism average.

Related Retail Insider stories:

• U.S. tariffs would force price hikes, drive up cost of doing business: CFIB
• Stagnant small business investment to fall in next 2 years: CFIB