OTTAWA — Canada’s economy is showing signs of trouble from the trade war, with uncertainty slowing investment, but some of the earlier headwinds were linked to winter weather.

Negative growth: Statistics Canada says the economy contracted by 0.2 per cent in February—the first monthly decline in real GDP since November. The contraction was led by a 0.6 per cent decline in goods-producing industries, with the sharpest drops in mining, quarrying and oil and gas extraction, at 2.5 per cent; and in construction, at 0.5 per cent. Service industries decreased by 0.1 per cent, but a small rise in finance and insurance helped make up for declines in transportation and warehousing, as well as real estate, rental and leasing.

Actual headwinds: It was not all about the tariffs. The agency said harsh weather in the North Atlantic, along with the collision of a tanker with an oil terminal in Newfoundland, played a role in lower offshore oil production in the region, while snowstorms in several regions affected transportation. Manufacturing and wholesale trade activity were both up, which CIBC economist Andrew Grantham said could reflect efforts to get ahead of tariffs after Trump granted Canada a reprieve. Statistics Canada’s early estimate for March sees declines in both sectors, offset by growth elsewhere with overall real GDP up 0.1 per cent that month.

Uncertainty: The latest quarterly outlook from Deloitte says uncertainty over the trade war is slowing momentum for the Canadian economy. The firm forecasts back-to-back declines in real GDP, at 1.1 per cent in the second quarter and 0.9 per cent in the third, in part due to a steep drop in businesses investing in machinery and equipment. Growth could return in the final quarter, the outlook said, but not if Trump eliminates the carve-out for goods in the North American trade pact. “If this were to materialize, Canada’s real GDP would be permanently lower by around three per cent by 2030,” wrote Deloitte chief economist Dawn Desjardins.

Below the border: An early snapshot from the U.S. Bureau of Economic Analysis shows a 0.3 per cent decline in real GDP in the first quarter of 2025, a significant shift from the 2.4 per cent growth in the previous quarter. The first contraction in three years was partly driven by a spike in imports before President Donald Trump sent markets into a tailspin by slapping so-called reciprocal tariffs on much of the world.

Not all about Trump: Fitch Ratings says new spending promised by the re-elected Liberal government will push deficits to levels surpassed only during the COVID-19 pandemic, and after the Great Recession. While Canada’s strong credit gives it room to manoeuvre, Fitch warns that larger structural deficits from higher spending could affect the country’s credit profile.