Growth is expected to strengthen modestly in 2026, says Sal Guatieri, BMO Senior Economist and Director Economics. Trade policy remains the central risk. While discussions could address contentious areas such as supply management and the Online Streaming and News Acts, the CUSMA review may also result in targeted tariff relief, including potential cuts to the 50% import tax on steel, aluminum, and some copper products. Such changes could reduce the U.S. average tariff on Canadian imports from around 7%. “Ongoing uncertainty, however, could cast a longer shadow on business confidence and investment. The impact of a USMCA breakdown would be far worse, potentially spiking the average tariff rate and triggering a moderate recession in Canada, even with significant policy support. Manufacturing industries that depend heavily on U.S. sales, including automobiles, electrical equipment, machinery, computers, and chemicals, would face dire consequences,” Guatieri says.