Most of the oil passing through the strait is bound for Asian markets, including China, India, Japan and South Korea. But oil is a global market, and a sharp price spike in one part of the world has cascading consequences that ripple down the line and affect other areas, including Canada.
Posthaste: Canada loses to the U.S. again, but this time it's not in the hockey rink
It looks like the United States will edge out Canada again, but this time it’s in an economic faceoff rather than on the hockey rink.
Canada’s gross domestic product (GDP) in 2025 came in at 1.7 per cent compared with 2.2 per cent in the U.S., the third straight year that the U.S. has outperformed its northern neighbour and the seventh time in the last eight years.
“To make matters worse, comparisons of (headline) GDP growth likely understate Canada’s economic underperformance,” Taylor Schleich, an economist at National Bank of Canada , said in a note, given that the main number doesn’t account for the change in population.
For example, GDP per capita has risen six per cent in the U.S. since 2022, but contracted in Canada, he said, adding that Canada’s economy typically mirrored that of the U.S. in the decade following the great financial crisis.
Canada is in the GDP penalty box for several reasons, Schleich said, including household consumption that undershot that of the U.S. by approximately three per cent during the same three-year period. Canadian export growth has also come up short by the same margin.
“The most pronounced gap, however, is on business investment,” he said.
Schleich estimated that business investment has grown by 10 per cent since 2022 in the U.S., but has been flat in Canada. Even worse, non-housing private sector investment in Canada displayed “alarming softness” in trailing that of the U.S. by 13 per cent.
This year isn’t looking significantly better.
Private-sector capital spending could rise 2.8 per cent in 2026 on the heels of a “modest” drop last year, according to a recent Statistics Canada survey . And private-sector machinery and equipment (M&E) investment is expected to register a paltry 0.6 per cent increase this year, suggesting it will contract once adjusted for inflation.
“That is consistent with our view that real M&E investment is set to contract again this year amid ongoing uncertainty across a range of trade-exposed businesses,” Robert Kavcic, a senior economist at BMO Capital Markets, said.
The one “bright spot,” Schleich said, is the increase in government investment. It grew four percentage points faster since 2022 and the GDP gap between Canada and the U.S. would have been closer to five per cent if not for “outsized support from fiscal policymakers.”
Kavcic estimates government investment will grow 5.1 per cent in 2026.
Overall, business investment in 2026 is expected to increase 3.7 per cent, the slowest pace since the pandemic.
“The good news is that the investment side of the economy isn’t going to drag seriously on growth this year, but there’s push and pull between ongoing public-sector stimulus and private-sector caution that will limit growth,” Kavcic said.
Still, government stimulus won’t be enough to give Canada the “edge,” Schleich said.
Canada doesn’t come out on top in this head-to-head contest with the U.S., but there are nonetheless some weak positions on the American side.
Non-residential business investment is “far from broad-based,” Desjardins Group principal economist Francis Généreux said in a note.
He said much of that spending is due to the construction of data centres to support artificial intelligence (AI) and related purchases of equipment and software, which may be sucking money away from other sectors.
Généreux said it’s also unclear whether spending commitments from U.S. trading partners worth trillions of dollars will ever materialize.
“The outlook could improve with greater clarity around trade policy and the lasting impact of the tax cuts passed last year,” he said. “If these factors fail to materialize, business investment in the United States may prove far less robust.”
Crush your taxes: A live Q&A with Jamie Golombek from the Financial Post
Tax season is in full swing and we know you have questions. That’s why we’re giving Financial Post readers a chance to put them to our expert tax columnist, CIBC’s Jamie Golombek, who will answer as many as he can live today at noon ET. Send in your questions to wealth@postmedia.com and register here to tune in live. Readers will also have the opportunity to submit questions during the event.
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Oil gained today as the deepening conflict in the Middle East disrupted crude flows, with Brent climbing near US$83 a barrel and WTI up more than two per cent to US$76.89.
At issue is the flow of oil through the Strait of Hormuz, a narrow waterway that serves as the only sea passage from the Persian Gulf to the open ocean. About 25 per cent of the world’s oil production, or 20 million barrels of oil per day, must pass through the strait to reach its end markets.
What might happen next comes down to a complicated geopolitical calculation that’s open to endless speculation and debate. — Gabriel Friedman, Financial Post
Keep reading here for what you need to know about the Iran conflict.
- Today’s data: U.S. Challenger jobs cuts, import and export price indexes
- Earnings: Maple Leaf Foods Inc., A&W Food Services of Canada Inc., Spin Master Corp., Canadian Natural Resources Ltd., Lithium Americas Corp., NuVista Energy Ltd., New Gold Inc., Martinrea International Inc., South Bow Corp. Aecon Group Inc., Ero Copper Corp., Doman Building Materials Group Ltd., Badger Infrastructure Solutions Ltd.
- Bank of Canada governor warns of growing risks to financial stability
- Mortgage renewal headwinds near a ‘turning point’ for pandemic buyers, report says
- Provincial and territorial leaders announce plan for a connected electricity grid
The launch of the Iran conflict has hiked market volatility and investor anxiety. Peter Hodson, of 5i Research, offers some strategies for positioning portfolios to brace for yet another conflict in the world. Find out more
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McLister on mortgages
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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.
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