Canadian corporations have demonstrated remarkable resilience, posting their strongest profit growth in two years despite ongoing challenges from US trade tariffs and economic headwinds.
Strong Profit Growth Defies Economic Challenges
According to data released by Statistics Canada, operating profits across Canadian businesses rose by 3.8% to reach C$200 billion ($142 billion) during the third quarter. This represents the fastest pace of growth witnessed in two years and marks a significant recovery from the seasonally adjusted contraction of 2.4% recorded in the previous quarter.
Financial Sector Leads the Expansion
The financial sector emerged as a primary driver of this growth, with earnings before interest and taxes surging by 6% to C$96 billion. Statistics Canada attributed this robust performance to reduced provisions for credit losses and increased non-interest income within the banking industry.
Beyond finance, non-financial industries also showed positive momentum, expanding their operating profits by 1.9% between July and September. The growth was broad-based, with increases recorded in 25 out of 39 business subcategories. Particularly noteworthy was the manufacturing sector, where profits rose in 10 of the country's 14 manufacturing industries.
Navigating Tariff Pressures and Economic Realities
The strong profit performance comes despite significant ongoing pressures from US trade policy. Major tariffs remain in effect on Canadian steel, aluminum, autos, and lumber products. The Bank of Canada anticipates meager economic growth in the second half of 2025 as business investment and exports continue to face challenges.
However, many of Canada's goods exports to the United States benefit from exemptions under the free trade agreement between the US, Canada, and Mexico. This protection has resulted in a relatively low effective tariff rate for the country overall.
Fred Demers, head strategist of multi-asset solutions with BMO Global Asset Management, characterized the situation, stating: "Tariffs are having a brutal but narrow hit." He added reassurance for investors, noting that "Firms are defending strong profit margins and investors should remain comfortable."
The data reveals that Canadian companies are maintaining strength overall despite contending with both tariff-related damage and an elevated unemployment rate, showcasing the underlying resilience of the corporate sector.
