Canada’s economy remains resilient, but growth has become increasingly uneven with the outlook highly sensitive to U.S. trade policy and other external shocks, according to a new AM Best report.

The Best’s Market Segment Report, “Canadian Economic Growth Has Been Volatile,” is the first of several reports focused on Canada’s major insurance segments ahead of AM Best’s Insurance Market Briefing – Toronto, which will take place Wednesday, Sept. 23, 2026.

According to the report, Canada’s economy weakened toward the end of 2025 and into early 2026, partly reflecting weaker manufacturing activity and continued pressure on trade-sensitive industries. Economic activity strengthened considerably in second-quarter 2026, led by stronger exports, particularly energy and other goods. Despite the improvement, the durability of the rebound remains uncertain given the surrounding U.S. trade policy and its potential impact on exports and the overall economy.

“Trade relations between Canada and the United States have become strained further following a breakdown in bilateral trade negotiations, and this has led to the reversal of some of the earlier easing in trade tensions,” said Ann Modica, director, Credit Rating Criteria Research and Analytics, AM Best. “Canadian exporters and businesses are likely to continue adjusting to a more uncertain trade environment; however, while Canada has made some progress in diversifying its export markets, its close economic ties with the United States leave its economy highly exposed to further changes in U.S. trade policy.”

Other report takeaways include:

• Labor market conditions remain soft but stable, with cautious hiring and moderating wage growth. However, the unemployment rate declined to 6.4% in July, its lowest level in two years.
• Real household consumption increased by 2.3% in 2025 with spending particularly supportive during the first half of 2025. Household demand remains resilient despite elevated borrowing costs, the softer labor market and continued economic uncertainty.
• The Bank of Canada is expected to keep rates unchanged as weaker growth is offset by renewed inflation pressures from energy prices and tariffs.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=368822.

For more information about AM Best’s Insurance Market Briefing – Toronto, please visit the event website.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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