N※N

Canada's Economic Outlook Darkens Amid Global Headwinds

  //stocks-investing.news-articles.net/content/202 .. nomic-outlook-darkens-amid-global-headwinds.html
  Published in Stocks and Investing on Friday, February 13th 2026 at 17:18 GMT by The Globe and Mail
      Locales: CANADA, CHINA, UNITED STATES

Toronto, Ontario - February 13th, 2026 - Canada's economic outlook is increasingly clouded by a confluence of global challenges, prompting caution from the Bank of Canada and raising concerns among businesses and consumers. A potent combination of potential U.S. tariffs, a decelerating Chinese economy, and the aggressive monetary policy of the U.S. Federal Reserve under Jerome Powell are creating a significant degree of uncertainty, threatening to derail Canada's recent, albeit surprising, economic resilience.

The Bank of Canada (BoC), in its latest monetary policy report released this Wednesday, acknowledged the growing weight of these headwinds, choosing to hold its key interest rate steady at 5 per cent. However, the report offered little optimism regarding the immediate future of inflation, predicting it will remain stubbornly above target for a longer period than previously forecast. Senior Deputy Governor Andrew Reed highlighted the triple threat facing the Canadian economy: "We're seeing a combination of factors weighing on the outlook...risk of further tariffs from the U.S.; a slowdown in China; and the Federal Reserve, which is still in a tightening cycle."

The Ever-Present Threat of U.S. Tariffs The spectre of U.S. tariffs remains a persistent worry. Initially imposed by the Trump administration in 2018 on Canadian steel and aluminum - purportedly for national security reasons - these tariffs were briefly lifted under the Biden administration. However, the possibility of their reinstatement looms large, particularly given the shifting political landscape in the U.S. and increasing protectionist sentiments. Pedro Antunes, Deputy Chief Economist at Toronto-Dominion Bank, emphasizes the enduring nature of this risk: "The risk of tariffs is always there. It's a geopolitical risk that's been hovering over the Canadian economy for years, and it's something that businesses have to factor into their planning." The reintroduction of tariffs could disrupt vital trade flows, severely impacting key Canadian industries reliant on U.S. markets, and potentially triggering retaliatory measures.

China's Economic Slowdown Ripples Across the Globe Adding to the complexity, China's once-unstoppable economic engine is sputtering. A confluence of factors, including a deepening real estate crisis, soaring youth unemployment rates (reaching record highs in recent reports), and a significant decline in consumer confidence, are collectively weighing on growth. This slowdown has direct implications for Canada, a significant exporter of commodities and resources to the Chinese market. The BoC has already observed a deceleration in Canadian exports to China, citing both the internal economic issues within China and the broader trend of global supply chains diversifying away from reliance on a single source. Diversification, while strategically sound for global businesses, means reduced demand from a historically crucial market for Canadian goods.

The Fed's Influence and Domestic Monetary Policy The actions of the U.S. Federal Reserve, led by Chairman Jerome Powell, are also exerting considerable influence on the Canadian economy. The Fed's aggressive interest rate hikes, implemented to combat persistent inflation in the U.S., have created upward pressure on interest rates in Canada. While the BoC has also been increasing rates, it must carefully balance the need to control domestic inflation with the risk of stifling economic growth. As Stephen Tapp, Chief Economist at Toronto-Dominion Bank, explains, the BoC is caught in a delicate position: "They need to keep interest rates high enough to tame inflation, but they also don't want to stifle economic growth." The interplay between the Fed's actions and the BoC's response is a critical dynamic to watch.

Inflation Persistence and Future Outlook The BoC now anticipates inflation to remain above its 3 per cent target until at least the second half of 2025 - a considerably longer timeframe than initially projected. This prolonged period of elevated inflation suggests that interest rates are likely to remain higher for longer, potentially dampening consumer spending and business investment. While Canada has demonstrated surprising resilience in recent months, defying expectations of a deeper slowdown, the cumulative effect of these headwinds is undeniably significant. Businesses are urged to proactively assess their exposure to these risks and adapt their strategies accordingly. Consumers should prepare for a potentially prolonged period of higher prices and cautious spending. The coming months will be crucial in determining whether Canada can successfully navigate this challenging economic landscape.