Canada survived Year 1 of the second Trump presidency mostly intact economically, and fully intact sovereignly. What about Year 2? For this series, The Globe asked dozens of economists, analysts and investors to pick a chart they think will be important in 2026. Explore some of the other topics in the index below.
Lost decade
David Wolf, portfolio manager, Fidelity Investments
Stagnant investment has been a cause and consequence of the lost decade for Canada’s economy. We can do better.
The loss of the U.S. as a reliable trading partner, following on the exhaustion of Canada’s long housing boom, means we must do better. The 2025 federal budget set out an ambitious agenda in this regard, aspiring to boost public investment and catalyze private investment. Only if this succeeds can we expect sustained growth in productivity and living standards for Canadians.
Playing catch-up
Trevor Tombe, professor of economics, University of Calgary
Few factors shape Canadians’ living standards more than productivity. When productivity rises, the economy grows, and wages can outpace inflation. But over the past decade, Canada’s productivity performance has sharply declined. For 25 years before 2015, our real GDP per capita was about 10 per cent above the average for Organization for Economic Co-operation and Development countries. Now, for the first time since comparable data has been available, Canada has fallen below the OECD average: 2 per cent under in 2024 – and possibly further behind in 2025 based on the latest forecasts from the International Monetary Fund.
While comparisons to the U.S. are common, falling behind peer nations more broadly signals a deeper concern. The federal government, now under Prime Minister Mark Carney, has launched a new productivity and investment agenda. Whether it succeeds or not may become clear in 2026. Given how tightly this issue links to affordability, no chart may matter more in the year ahead than this one.
Patently obvious
Laurent Carbonneau, director of policy and research, Council of Canadian Innovators
When we talk about Canada’s innovation and productivity metrics, we usually fixate on low rates of research and development investment or the burdensome tax system. A better way to look at the issue is by tracking investment in a class of assets that other economies have been flocking to: intangible assets and intellectual property. In today’s economy, companies and their home economies grow on a foundation of data, patents and other IP.
The U.S. in particular uses its IP edge as a lever to discipline allies and rivals alike: the government works closely with American companies to embed their technology into global standards and to push back on efforts to regulate U.S. companies. Then the companies use their market dominance to extract revenue from customers.
Investing in intangible assets is important to more than just Canada’s economic success. They can be a strategic moat, giving us leverage and independence when we need it most.
A capital idea
Jim Stanford, economist and director, Centre for Future Work
Canada once depended on incoming U.S. capital to build our economy. But our net foreign investment balance with America has shifted dramatically, as huge amounts of Canadian capital flow into U.S. assets – everything from equities and property to government bonds and cryptocurrency.
Since 2015, Canadian investment in the U.S. has exceeded U.S. investment in Canada. And the gap is swelling dramatically: up to $1.6-trillion in Canada’s favour (equivalent to about 50 per cent of Canada’s annual GDP). Even the Canada Pension Plan has half its assets in Donald Trump’s America.
This is an underappreciated aspect of the now-conflicted bilateral relationship. Canada has helped supply the U.S. with the enormous capital inflows needed to finance its perpetual trade deficits.
Bringing our capital home would help pay for big projects to strengthen Canada against Mr. Trump’s trade war.
Incidentally, it would also reduce the U.S. trade deficit – which results from those capital inflows, not “unfair” treatment by America’s trading partners.
Shared misery
Ben Eisen, senior fellow, and Jake Fuss, director of fiscal studies, Fraser Institute
One under-discussed dimension of Canada’s economic growth crisis is the fact it grips all 10 provinces.
Historically, there has often been regional variation in provincial economic performance. When one region has struggled, better performance elsewhere has often helped drive national growth.
Our chart shows one feature of Canada’s current malaise is the consistency of miserable growth across all 10 provinces. We show the compound average annual growth rate of inflation-adjusted per-person GDP in every province from 2019 to 2024 to demonstrate that there isn’t a good news story in sight.
Ontario, once the engine of Canada’s economy, has averaged minus 0.1 per cent growth. Alberta, which has often propelled growth during periods of weakness in Ontario, has performed even worse, at minus 0.8 per cent. The “better” performers such as B.C. and Quebec have posted growth rates that are still miserable in historical terms.
If Canada’s economy is an engine, no cylinders are firing.
Mind the gap
Pedro Antunes, chief economist, Conference Board of Canada
Economists often focus on Canada’s lagging nationwide labour productivity, and for good reason. It helps us gauge gains in prosperity and benchmark ourselves against other countries. By that measure, the outlook is troubling. Pandemic swings aside, overall labour productivity growth in Canada has been lethargic – real output per hour worked is just 1.9 per cent higher than in 2017.
But as a diagnostic tool, aggregate figures don’t tell us where the real problems lie. To better understand what’s driving the decline, we need to drill to the industry level, especially in sectors critical to Canada’s nation-building ambition. Unfortunately, a drop in transportation and construction labour productivity accounts for much of the weakness. Today, construction productivity is down nearly 7 per cent from 2017. The reason is largely due to a steep deterioration in residential construction, where over the past few years, governments have poured money into a supply-constrained sector, resulting in a sharp drop in our building efficiency.
Transportation productivity has also weakened, falling 5.1 per cent from 2017 levels. Depressed public transit use is contributing to congestion across major cities, slowing people and goods and spilling over into trucking, rail and our overall efficiency at moving goods and people.
This raises real concerns about our nation-building agenda. As Canada looks to expand investment in resource projects, bolster housing construction and diversify our trade corridors, our success will also hinge on improving our productivity performance, especially in these key industries.
Factory settings
Alan Arcand, chief economist, Canadian Manufacturers & Exporters
While Canada’s economy has avoided the worst effects of the trade war with the U.S. because USMCA-eligible goods have been exempted, the same is not true for the manufacturing sector. Manufacturing has been the central target of U.S. trade policy from the start, with punishing and unjustified sector-specific tariffs hitting industries such as steel, aluminum and autos. Since March, 2025, manufacturing employment in Canada has fallen by almost 30,000 jobs.
But manufacturing employment is also down nearly 60,000 in the U.S., as higher input costs and supply chain disruptions take hold, raising doubts about whether the tariff strategy can truly support reshoring efforts. Manufacturing challenges on both sides of the border could increase pressure to reach an agreement, especially with the USMCA joint review set for 2026. The key question is how much more damage will be done before the U.S. recognizes Canada’s essential contribution to its manufacturing competitiveness.
Ill equipped
Bill Robson, president and CEO, C.D. Howe Institute
Business investment in machinery and equipment (M&E) is essential to raising productivity, wages and competitiveness. The latest data show Canada falling badly behind its most important trading partner and competitor, the U.S. Canadian workers have always enjoyed less M&E investment than their U.S. counterparts. But investment per available worker by Canadian business was around 60 cents for every dollar invested by U.S. businesses in the 2000s. It fell to the 40-cent range over the past decade and by the second quarter of 2025 registered an anemic 37 cents. U.S. workers are gaining access to better tools and technologies, while in Canada, investment is so low that capital per worker is shrinking. Canada needs reforms to growth-stifling taxes and regulations to help our workers compete and raise living standards.
Best-laid plans
Pierre Cléroux, chief economist, Business Development Bank of Canada
The Probable Investment Index (PII) is a composite measure designed to capture the likelihood that an announced investment plan will materialize. It combines two critical dimensions: the proportion of firms intending to invest and the proportion that are confident they can execute those plans.
Canadian businesses face a paradox. Household consumption remains the main growth engine, but its momentum is modest, constrained by cautious sentiment. Businesses’ margins are under pressure from elevated input costs and persistent wage inflation, leaving little buffer against uncertainty. Productivity gains have stalled, and without targeted investment in technology and operational efficiency, firms risk falling behind competitors that can adapt quickly and cost-effectively.
The PII identifies where business intentions align with confidence. For 2026, it’s signalling capital deployment is unlikely to occur. In an environment of moderate demand and squeezed profitability, prioritizing investments that enhance productivity is essential.
Lost for longer
Charles St-Arnaud, chief economist, Servus Credit Union
Canada’s underperformance since 2015 has been dubbed “the lost decade.” However, focusing solely on aggregate data misses the real picture, where Canada’s economic malaise started well before 2015. Looking at the drivers of Canada’s GDP-per-capita performance relative to the U.S., we can see that the oil boom that ended in 2014, when oil prices collapsed 60 per cent, obscured the mediocre performance of the rest of the economy, especially the export sector.
The lack of rebound in oil and gas investment in recent years, despite favourable oil prices, is due to oil companies returning a greater share of their revenues to shareholders rather than investing in their operations, something not unique to Canada.
The poor performance of Canada’s non-energy sectors is due to chronic underspending on productive investment over multiple decades, causing a lack of competitiveness. More importantly, there’s evidence that household borrowing over the past 30 years has crowded out business investment.
Chill, eh
Karl Schamotta, chief market strategist, Corpay Currency Research
Alfred Hitchcock once remarked: “There is no terror in the bang, only in the anticipation of it.” Something similar may describe the mood surrounding Canada’s economy. Measures of policy uncertainty have surged well beyond those in peer countries over the past year, reflecting justified concerns about Canada’s exposure to U.S. demand, the prospect of a broader downturn in global trade and the risk of further external shocks. Yet the lived reality has been far less dire.
With effective U.S. tariff rates on Canadian exports remaining well below those faced by most other trading partners, Canada’s competitive position has arguably improved. Our exports are holding firm, employment in affected industries has remained remarkably stable and the episode has helped spur a renewed policy focus on enhancing competitiveness. In our view, this gap between uncertainties and on-the-ground realities represents an opportunity for forward-looking Canadians to invest and position themselves for a stronger future.
Going it alone
David Watt, founder, Watt Strategic Economic Advisors
The lack of momentum in the number of incorporated business owners hiring employees is a warning sign regarding the future vibrancy of the Canadian economy. This is because the number of incorporated self-employed businesses with paid help is a rough measure of entrepreneurship.
The chart shows that a rising share of incorporated business owners are now sole operators. This highlights a decline in business dynamism and a risk to future job creation given that small firms have historically been a key driver of job growth. The engine is misfiring. While there has been a lot of focus on big things, such as the Major Projects Office, we also need to sweat the small stuff – invigorating small and medium-sized enterprises and entrepreneurship – or there will be a weak foundation for the Prime Minister’s envisioned “biggest transformation since the end of the Second World War.”
Bring it home
Vass Bednar, managing director, the Canadian SHIELD Institute
Canadian investment abroad and foreign direct investment (FDI) in Canada were once roughly in balance. Over the past decade, that relationship has diverged. That means Canada is now sending more investment dollars abroad than international players are investing here. In 2024, the gap was nearly $1-trillion. The Prime Minister is working to lure more foreign capital to Canada. He’s already signed agreements with the United Arab Emirates, Indonesia and Mexico in this push.
As the pace of this deal-making accelerates, our attention should shift from the volume of FDI to its composition and consequences. Without guardrails, more foreign ownership of critical infrastructure can carry practical implications for supply chains and pricing power.
Indiscriminately chasing FDI risks trading sovereignty for growth. Our challenge is not only to attract capital, but to ensure Canada continues to shape who owns and governs our economic foundations.
Shifting to reality
Ian Lee, associate professor, Sprott School of Business, Carleton University
World annual R&D spending for automotive manufacturing totalled roughly €167-billion or US$192-billion in 2022, according to Europe’s auto manufacturers association. Focusing only on the U.S., the country spent roughly US$38.7-billion on automotive manufacturing R&D, while total U.S. capital investment in the sector exceeds US$50-billion annually.
These gargantuan investment sums require very large markets to support very long production runs to in turn achieve the economies of scale necessary to recover those costs. The arithmetic reveals why Australia exited auto manufacturing in 2018, and the same fate may be inevitable for Canada, which had seen vehicle production levels shrink for years even before the Trump administration targeted the sector. Canada is simply too small – with just 40 million people (less than California) – to compete successfully in automotive manufacturing unless it has tariff-free access to the U.S. market. The coming year and the USMCA negotiations will determine the sector’s fate.
Illustration by Matthew Billington
2026 in charts: The full series
What’s ahead for the job market and household spending
A guide to Year 2 of the Canada-U.S. trade war
A housing-market horoscope for Canadians
Five charts to help follow fiscal and monetary policy
Stablecoins, AI and more trends on the market's mind
Seven policy points to remember as Carney presses Canada to build big
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