BMO warns Canada could face a recession if tariffs stay, but with record-high household debt and shrinking trade, it’s already looking worse

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The Bank of Montreal (BMO) is sounding the alarm. Canada is staring down the barrel of a recession. And while they are calling it “moderate,” the reality on the ground suggests something much worse. With U.S. tariffs tightening their grip and household debt already at a staggering 105% of GDP, Canada’s economic foundation looks dangerously unstable.

The problem? A 25% levy on goods from Canada and Mexico is squeezing key industries, hitting manufacturing and agriculture particularly hard. When the bulk of your exports, 76%, are tied to one trading partner, tariffs are not just an inconvenience. They are an economic chokehold. Canadian businesses now face higher costs, reduced competitiveness, and shrinking profit margins. This is not just about numbers on a spreadsheet. It is about jobs, livelihoods, and a nation’s economic future.

BMO’s analysis warns that if these tariffs persist, Canada could slip into recession. Slower growth, rising unemployment, and weaker consumer spending are all on the horizon. And let’s be honest. When household debt is already one of the highest in the world, how much cushion do Canadians really have left? People are already feeling the squeeze, and a downturn would only make things worse.

The sentiment among Canadians is bleak. A recent BMO poll found that 63% of respondents fear a recession within the next year, and nearly half believe the economy will weaken further. That is not “moderate” concern. That is full-blown anxiety. When your country is this dependent on U.S. trade, a tariff war is not just a minor speed bump. It is a direct threat to economic stability.

The writing is on the wall. Canada’s economy is not just vulnerable. It is in deep trouble. The combination of reckless spending, excessive debt, and dependency on the U.S. market has left the country with few options. If the tariffs remain, expect the pain to deepen. And if a “moderate” recession is the best-case scenario, what does the worst-case look like?

Sources:
https://www.statcan.gc.ca/en/start

https://www.biv.com/news/canadian-recession-looms-this-year-if-us-tariffs-stay-in-place-economists-10318533