Canada's economy shrinks in the second quarter, with exports hit hard by US tariffs.

Canada's economy has contracted for the first time in nearly two years, as the trade war with the United States severely hit the country's exports and business investments. Data released by Statistics Canada on Friday showed that the country's gross domestic product fell by 1.6% on an annualized basis in the second quarter, marking the largest drop since the outbreak of the COVID-19 pandemic and the first contraction in nearly two years. While the data was in line with the Bank of Canada's forecast, it fell short of economists' expectations of a 0.7% decrease. Exports declined by 27% on an annualized basis due to the impact of US tariffs on Canada, completely reversing the temporary growth in trade activities seen in the first quarter when exporters had tried to rush shipments ahead of Trump's tariffs being fully implemented. Imports also fell by 5.1%. Business investment, which had only grown by 1.1% in the first quarter, shrank by 10.1% in the second quarter, highlighting the increasingly pessimistic mood faced by Canadian businesses in response to the US tax policies and constantly changing policies.