Here's a summary of the CBC News article: ## ANALYSIS: U.S. Economy Thriving Despite Tariffs, But Resilience May Be Fragile **News Title/Type:** Business Analysis **Report Provider/Author:** CBC News / Peter Armstrong **Date/Time Period Covered:** The article discusses the economic impact of the Trump administration's trade war, referencing recent earnings reports (e.g., General Motors' second quarter) and economic indicators from the spring and early summer. The publication date of the article is implied to be around late July 2025, based on the "publishedAt" field. --- ### Main Findings and Conclusions: The article analyzes the surprising resilience of both the U.S. and Canadian economies in the face of the Trump administration's trade war and tariffs. While economists initially predicted severe economic pain, the impact has so far been contained to specific sectors. However, this resilience is described as **fragile** and could be quickly disrupted if the trade war escalates. ### Key Statistics and Metrics: * **General Motors (GM) Profits:** GM's profits were down by **35%** in the second quarter due to Trump's tariff policies. The automaker reported a **$1.1 billion US loss** in its quarterly earnings attributed to tariffs on cars and parts. * **Canadian Economic Growth:** Economic growth in Canada shrank by **0.1%** in April, with another **0.1%** decline likely for May. * **Canadian Unemployment Rate:** The unemployment rate in Canada declined since peaking at **7%** in May. * **Canadian Consumer Spending:** Retail sales figures showed consumer spending had started to pick up again in June. * **Average Effective Tariff Rate for Canada:** Exemptions for CUSMA-compliant products have lowered the average effective tariff rate for Canada to as low as **2.3%**. ### Important Recommendations: The article doesn't offer explicit recommendations but highlights the concerns of economists regarding the potential for future pain. Michael Davenport, senior economist at Oxford Economics, noted that without a trade deal by August 1st, job losses and higher prices from tariffs are expected to squeeze disposable income and cause households to reduce spending. ### Significant Trends or Changes: * **U.S. Economic Resilience:** Despite predictions, the U.S. economy is performing well, with stocks at all-time highs, strong employment, economic expansion, and no significant surge in inflation. * **Canadian Economic Resilience:** Canada's economy has also shown unexpected strength, with consumer spending picking up and unemployment declining. * **Companies Absorbing Costs:** American businesses, like General Motors, are absorbing the costs of tariffs rather than passing them on to consumers, possibly to avoid drawing the ire of President Trump. * **Stock Market Performance:** Stock markets in both Canada and the U.S. are at or near record highs, which investors interpret as a sign of sustained resilience. * **Delayed Impact of Tariffs:** A significant stockpile of products in the U.S. may be delaying the full impact of tariffs, as American importers have not yet fully borne the costs. * **CUSMA Exemptions:** Canada has benefited from exemptions for CUSMA-compliant products, which have mitigated the impact of U.S. tariffs. ### Notable Risks or Concerns: * **Fragile Resilience:** Economists warn that the current economic resilience in both countries is **fragile** and could be quickly overturned if the trade war intensifies or expands. * **Potential for Escalation:** Some within the Trump administration might view the U.S. economy's resilience as a reason to impose more punitive tariffs. * **Uncertainty of CUSMA Carve-outs:** Concerns exist that the exemptions Canada has secured for CUSMA-compliant products may not be permanent. * **Future Pain:** Economists suggest that some pain from tariffs is likely still to come, even if it's not as severe as initially feared for the U.S. * **Upending the Balance:** Any action that disrupts the current delicate balance of importers absorbing costs, exporters lowering prices, and countries limiting retaliation carries significant risks for both sides. ### Material Financial Data: * **General Motors:** A **$1.1 billion US loss** in the second quarter due to tariffs, leading to a **35% drop** in profits. * **Canadian Economic Indicators:** **0.1%** shrinkage in economic growth in April, with a projected **0.1%** decline for May. Unemployment rate peaked at **7%** in May. * **Tariff Impact:** The average effective tariff rate for Canada has been reduced to **2.3%** due to CUSMA exemptions.
ANALYSIS | The U.S. economy is thriving in spite of tariffs. Will it last? | CBC News
Read original at CBC →Business·AnalysisWhen the Trump administration launched its trade war, economists said it would cause severe economic pain in both Canada and the U.S. So far, that pain has been contained to specific sectors. That resilience sheds some light on what may come next.What the recent economic resilience tells us about what comes next in the trade warU.
S. President Donald Trump is greeted by Prime Minister of Canada Mark Carney, as he arrives at the G7 leaders' summit in Kananaskis, Alta., on June 16. When the Trump administration launched its trade war, economists said it would cause severe economic pain in both Canada and the U.S. So far, that pain has been contained to specific sectors.
(Stefan Rousseau/Reuters)By just about every indicator, the U.S. economy is holding up remarkably well. When Donald Trump launched his global trade war, economists and markets said his tariff policy would slow the economy, drive up prices and dramatically reduce global trade.And yet, stocks are at all-time highs, the country's employment is strong, its economy is expanding and the expected surge in inflation hasn't materialized.
Canada's economy has shown surprising resilience, as well, with consumer spending starting to pick up last month and unemployment declining.Economists told CBC News it's unclear whether the tariffs' impact was overestimated, or if further pain lies ahead. But they say resilience in both countries is fragile, and could be quickly upended if the trade war worsens or expands.
A lack of retaliationBMO's chief economist Douglas Porter says two key factors are driving the recent U.S. resilience. "Other nations have not really been retaliating against the U.S., so their own exports are not facing that much pressure. And on the flip side, the U.S. consumer has been pretty heavily sheltered so far from this," said Porter.
In the meantime, American businesses have not passed on the costs of tariffs. General Motors, for example, released earnings last week that said Trump's tariff policies drove down profits by 35 per cent in the second quarter. The automaker said tariffs on cars and parts led to a $1.1-billion US loss in its quarterly earnings.
But still, it has not increased prices.GM said its profits fell by $1.1 billion US in the second quarter of this year as a result of Trump's tariffs. (Chris Helgren/Reuters)Royce Mendes, managing director at Desjardins Capital Markets, says that's becoming a trend among affected American companies."
Some companies may choose to just eat the tariff increase in costs rather than draw the ire of President Trump," said Mendes.GM stock fell on the news, but has since rebounded, paring losses and climbing almost all the way back to where it was before it published its earnings.Financial markets have had some pretty volatile sessions, including steep sell-offs when tariffs are announced, and big rallies when exemptions are made.
But stock markets in both Canada and the U.S. are at or near record highs — which investors believe is a sign that the resilience we're seeing will last.A stockpile of productsThe question, though, is whether the impact of the tariffs has simply been delayed.When the levies were first announced last spring, businesses around the world scrambled to get product out the door and into the United States.
That has led to a huge stockpile of products — and it means American importers have not yet had to bear the worst of the tariffs.WATCH | The future of Canada-U.S. free trade: Is Canada-US free trade dead? | About ThatNorth American free trade is teetering on the edge of uncertainty as U.S. President Donald Trump's tariffs continue to complicate how goods come and go.
Andrew Chang explores signs that free trade — as we've come to know it — is on its way out, and challenges that may lie ahead in renegotiating the Canada-U.S.-Mexico Agreement (CUSMA). Images provided by Getty Images, The Canadian Press and Reuters."There was a lot of front-running and that may be one of the big reasons why we haven't seen much impact yet," said BMO's Porter.
"There's probably some pain to come, but I don't think it's going to be as bad as many economists were fretting about earlier this year, at least for the U.S."Canada's economy has shown resilience, tooBut both economists point to the fact that Canada's economy has also fared better than almost anyone had expected.
Economic growth shrank in April, but only by 0.1 per cent. Statistics Canada says another 0.1 per cent decline is likely for May. (Those numbers will be confirmed on Thursday.) The unemployment rate has actually begun to decline since peaking in May at seven per cent. Are you a young person who is interested in personal finance and watches financial advice videos on social media?
We want to speak to you for an upcoming story. Send an email to ask@cbc.ca. And last week's retail sales figures showed consumer spending had started to pick up again in June.Many Canadian exports can avoid Trump tariffs if CUSMA-compliant. Here's what that meansSign up for Peter Armstrong's weekly newsletter here"We've been pointing to this broader resilience in consumer spending," said Claire Fan, a senior economist with RBC.
She says consumer sentiment plunged in the spring, at the height of the uncertainty. But since then, RBC crunched U.S. customs data and found exemptions for CUSMA-compliant products have dragged the average effective tariff rate all the way down to as low as 2.3 per cent."It's a reflection of President Trump's overall strategy of coming out very aggressive early on, but then walking things back.
I mean, the tariffs have not been as punitive for Canada as initially believed — nowhere close to it," said Mendes of Desjardins.Sector-specific painHowever, real damage has been done in sectors like auto, steel, aluminum and lumber. The concern now is that the carve-outs Canada has secured for CUSMA-compliant products won't last."
Unless a trade deal is reached to significantly reduce U.S.-Canada tariffs by Aug. 1, when new U.S. tariffs are set to come into effect, we expect job losses and higher prices from tariffs to squeeze disposable income and cause households to tighten their purse strings," wrote Michael Davenport, senior economist at Oxford Economics in a note to clients.
WATCH | Negotiations continue between Canada and the U.S.: ‘Canadians expect us to take the time necessary' to reach a U.S. trade deal: LeBlancCanada-U.S. Trade Minister Dominic LeBlanc, speaking to reporters in Washington, D.C., said Canada will only accept a deal when there is one in the best interest of workers and the Canadian economy on the table.
On the one hand, some in the Trump administration will look at the U.S. economy's relative resilience as a reason to double down and push harder for more and more punitive tariffs.But escalation wouldn't just be bad for the Canadian economy.Right now, most businesses and consumers on both sides of the border have been sheltered from the worst impacts of the tariffs.
That shelter depends on a fine and tricky balance of importers eating some costs, exporters dropping some prices and countries limiting retaliatory measures.Upending that balance further comes with risks on both sides of the dispute.ABOUT THE AUTHORPeter Armstrong is a senior business reporter for CBC News.
A former host of On the Money and World Report on CBC Radio, he was previously a foreign correspondent and parliamentary reporter for CBC. Subscribe to Peter's newsletter here: cbc.ca/mindyourbusiness Twitter: @armstrongcbc
