Canada's economy has spent years trailing its rich-world peers, but a new note from Australian investment bank Macquarie suggests the tide may be turning. Despite the drag from US tariffs that have weighed on the country since early 2025, Macquarie says Canada's growth outlook is finally starting to improve, thanks to better momentum and some structural strengths that could support a longer-term pickup.
Why Canada has lagged behind
Macquarie economist David Doyle points to a key culprit: weak productivity. Productivity measures how much the economy produces per hour worked, and Canada has struggled on this front for years. As a result, real GDP per person—a common gauge of living standards—has fallen behind the US and other G7 economies.
Trade frictions haven't helped. Macquarie estimates that goods exports have been hit by the tariff environment, adding another layer of pressure on an economy already dealing with sluggish output per worker. The combination has left Canada in a slower-growth lane compared with its peers.
What's changing now
Despite those headwinds, Macquarie sees reasons for optimism. The bank says improving momentum and structural strengths could lift Canada's longer-term growth trajectory. While the note doesn't spell out every driver, it suggests that the worst of the drag may be behind the country and that the underlying economy is finding firmer footing.
This is a notable shift in tone. For much of the past several years, Canada's growth story has been one of underperformance. If Macquarie is right, investors may need to start pricing in a more resilient Canadian economy—one that can grow even with tariffs in place.
What it means for investors
For everyday investors, the implications are mostly about the broader backdrop rather than specific stock picks. A better growth outlook can support corporate earnings, which tends to be positive for Canadian equities. It can also influence the Bank of Canada's interest rate decisions—stronger growth might reduce the need for aggressive rate cuts, which would affect bond yields and borrowing costs.
That said, the picture is far from certain. Tariffs remain a live risk, and productivity gains are notoriously hard to achieve quickly. Investors should watch for signs that the improvement is real—such as stronger GDP reports, better export data, or upgrades to growth forecasts from other institutions.
For context, Canada's struggles have been a recurring theme in global markets coverage, where currency moves and central bank policy often reflect growth expectations. A brighter Canadian outlook could also ripple into sectors like banking, where National Bank of Canada's recent results showed how capital markets activity can drive profits even in a sluggish economy.
The bigger picture
Canada isn't alone in facing trade tensions and productivity challenges. But its position as a major exporter—particularly of energy and commodities—makes it especially sensitive to tariff policy and global demand. The fact that Macquarie sees improvement despite those pressures is a signal that the country's economic fundamentals may be stronger than recent headlines suggest.
Investors should keep an eye on upcoming data releases and central bank commentary for confirmation. If Canada's growth outlook continues to brighten, it could mean a more favorable environment for Canadian assets—and a reason to look beyond the tariff noise.
