Canadian businesses are becoming less optimistic about the economic outlook following stalled trade negotiations with the United States, as tariffs and retaliatory trade measures continue to weigh on business confidence.
According to the Bank of Canada’s latest survey, US tariffs and Canada’s countermeasures have created uncertainty for businesses, affecting their expectations for exports, production costs and future demand.
Reuters reported on October 19, 2026, that the Bank of Canada gathered feedback from 340 business leaders in September. The survey indicated that business expectations were affected after trade negotiations stalled on August 21.
Although confidence has weakened, the central bank’s assessment suggests that business sentiment remains relatively stronger than it was during the peak of trade tensions last year.
Export Sales Face Pressure
The survey found that signs of improving demand emerged at the beginning of the third quarter of 2026. However, export sales weakened, while businesses remained cautious about hiring plans.
Most companies indicated that they intended to retain their existing employees, but there was little evidence of a strong appetite for additional recruitment. The findings suggest that businesses are reluctant to increase expenses amid uncertainty surrounding trade relations.
Expectations for wage growth remained broadly stable, according to the report. Nevertheless, trade restrictions and global economic developments continue to put pressure on business costs and prices.
Inflation Concerns Remain
The Bank of Canada’s survey also pointed to rising inflation expectations. Trade disputes and developments in the Middle East have increased concerns among businesses about future costs.
Bank of Canada Governor Tiff Macklem has highlighted the influence of energy prices on inflation. However, the prospect of interest rate increases could become more significant if inflationary pressures spread beyond energy to other sectors of the economy.
The survey also examined consumer expectations. More than half of respondents expressed the view that a recession could occur over the coming year. Expectations for inflation over the next five years also increased.
A Challenging Period for Canadian Companies
For Canadian businesses, one of the biggest challenges is adapting their strategies to an uncertain trade environment. Companies that depend heavily on the US market could face further pressure from tariffs and changes in export demand.
In response, exploring alternative markets, controlling operating costs and improving domestic production capacity could become increasingly important. However, these are potential strategic responses rather than measures confirmed to have been adopted by all businesses surveyed.
Overall, the Bank of Canada’s findings highlight the importance of progress in trade negotiations for business confidence. If uncertainty persists, companies may continue to take a cautious approach to investment, hiring and export-related decisions.
The outlook for Canadian businesses will depend partly on how trade relations with the United States evolve and whether companies can manage the pressures arising from tariffs, inflation and changing global economic conditions.
