Canadian businesses’ confidence in the economy remains low in the second quarter of 2025, according to the “Business Insights Quarterly (Q2 2025)” report published by the Canadian Chamber of Commerce’s Business Data Lab.
This marks the fourth straight quarter in which business sentiment has declined. Exporters’ optimism was at its lowest in years when it is usually one of the most confident firms. According to the report, this was driven by tariff worries, supply chain disruption, and weak demand.
Exporters have also been more affected by the Canadian counter-tariffs than by the US tariffs; 37 percent of Canadian businesses had medium-to-high exposure to the retaliatory tariffs while 35 percent were impacted by the US tariffs.
“This quarter marks a critical inflection point. Rising costs, tariff threats and policy uncertainty are creating a more volatile landscape for Canadian businesses. Mid-sized and large companies — key anchors of our supply chains — are feeling the squeeze from both shrinking demand and increasing costs,” BDL vice president Patrick Gill said in a statement.
The report cited the tense trade environment, increasing inflation concerns, and slowing consumer demand as factors in the confidence drop, which was especially significant in tariff-vulnerable areas. Uncertainty around trade policy has peaked since the Canada-United States-Mexico Agreement, and firms face pressure to diversify their markets, enhance inventory, and look for new suppliers.
Mid-size firms also face higher debt constraints as borrowing costs tick up and investment plans are hampered by constrained repayment capacity.Twenty-five percent of businesses have pointed to high expenses as their primary growth barrier, and firms are expecting to increase prices in the next few months.
Nonetheless, exporters have been adapting to the US tariff threats by entering non-US markets, capitalizing on CUSMA preference, and changing supply strategies to limit exposure.
“Canadian businesses continue to demonstrate resilience. But the path ahead is more complex. Strategic planning, policy responsiveness and access to timely data will be essential for navigating this new era of economic volatility,” Gill said.