1. Canada recession risk
After contracting in the second quarter of 2025, Canada narrowly avoided a technical recession thanks to a collapse in imports and additional government spending. Looking ahead, any increase in tariffs would further impair Canada’s export performance. High household debt also risks triggering a slowdown in consumer spending.
2. Global trade war
Although some trade deals were signed in late 2025, there’s a real risk that trade tensions reignite. Escalating tariffs and rising uncertainty could pressure inflation, depress economic growth and strain supply chains as importers rush to build inventories.
3. CUSMA discord
Renewal of the Canada-United States-Mexico Agreement (CUSMA) is critical for business continuity. Changes to rules of origin, tariff rates and sensitive sectors pose a risk to businesses across North America. A weakening of the accord would threaten trade stability and negatively impact Canadian exporters.
4. Global recession risk
Protectionism and eroding international norms threaten co-operation, raising the risk of a global downturn. A synchronized slowdown would weaken labour markets, tighten credit and increase defaults—creating systemic stress for companies.
5. China-Taiwan escalation
The South China Sea is vital for global trade, energy transport and supply chains, with trillions of dollars in goods and a significant portion of global maritime traffic passing through annually. Taiwan’s role as a semiconductor hub makes any deterioration in security a severe risk for Canadian exporters reliant on high-tech inputs and shipping lanes.
6. Globalization slowdown
Trade and geopolitical tensions are reshaping globalization. A more fragmented, regionalized system incentivizes resilience over efficiency, leading to suboptimal trade and investment decisions and eroding long-term prosperity.
7. U.S. recession risk
Despite resilience, the United States faces risks from inflationary pressures, labour market deterioration, declining business investment and financial market volatility. A U.S. recession would almost certainly spill over into the Canadian economy.
8. Erosion of global institutions
Institutions like the World Trade Organization (WTO) and World Bank are under pressure. For Canadian exporters, weakened global governance means increased trade uncertainty and systemic risk, raising the cost of doing business.
9. Geopolitical risk
As recent events in Venezuela, Iran and Greenland highlight, geopolitical risk is elevated globally. This risk isn’t confined to one country or region but reflects a broader trend of increased conflict and instability. These tensions can force companies to reorient supply routes and target markets, driving up logistical costs and creating uncertainty for exporters.
10. Climate reprioritization
Policy changes and capital constraints risk squeezing investment in clean technologies. Reduced funding for mitigation and adaptation technologies could have long-term repercussions for the global economy.
