Posthaste: A recession is headed Canada's way and it's likely coming sooner than you think, says report

Canada could soon face a recession that would extend throughout the rest of the year as United States President Donald Trump’s tariff war upends economies and trade around the world, according to a new analysis by Desjardins Group.

The financial services firm is calling for Canada’s economy to contract 1.3 per cent in the second quarter, followed by two more consecutive contractions of 0.4 per cent and 0.3 per cent in the third and fourth quarters, respectively, with the economy rebounding “somewhat” at the start of 2026.

The definition of a recession is two consecutive quarters of negative growth.

“U.S. economic policy is expected to hold back trade, investment, job creation, consumption and growth here in Canada,” the report said.

In tandem with dimming economic prospects, the report expects the unemployment rate in Canada to rise to 7.4 per cent in the second quarter, from 6.6 per cent currently, and then eight per cent in the third quarter.

Desjardins is basing its estimates on Trump’s policies that have been implemented so far, including higher tariffs on Chinese imports, a 25 per cent tariff on steel and aluminum, 25 per cent tariffs on goods from Canada and Mexico and 10 per cent on energy.

“Despite temporary exemptions on (Canada-United-States-Mexico-Agreement)-compliant goods, we can expect more protectionist measures to come.” Desjardins said.

The firm thinks Trump will end those exemptions in April and also expand tariffs on other countries, with relief from the duties arriving in 2026 when levies on most products are reduced to 10 per cent from 25 per cent and to zero per cent from 10 per cent on energy.

But some damage has already been done.

The Bank of Canada in its January Monetary Policy Report said “the