Canada Business Outlook Research Brief

Weak sentiment persisted entering 2026. In the final quarter of 2025, business confidence remained subdued amid lingering trade risks and weak consumer demand over the past year. Despite rebounding from its May low, the monthly index tracking current business conditions has remained below its historical average since September 2023. Although most Canadian goods were exempt from U.S. tariffs, exporting firms continued to face headwinds. Those included soft U.S. demand, hesitation among U.S. customers to engage Canadian suppliers due to trade policy uncertainty, and firms’ own reluctance to enter the U.S. market. That said, expectations for future sales improved modestly, driven by more optimistic outlooks among firms less exposed to U.S. trade policies.