5 Canadian Business Trends to Watch in 2025

It was a busy 2024 for Canadian business: the Bank of Canada started cutting interest rates as inflation moderated, and labour unions pushed to recover lost wages. Some of those trends are likely to continue into 2025, but the new year will also bring fresh uncertainties and risks for companies, investors and households.

Below are five key developments to watch in Canadian business through 2025.

Canada–U.S. relations: Trump, tariffs and the future of CUSMA

Canadian companies will be watching the United States closely after Donald Trump was elected for a second term and is set to be sworn in on Jan. 20. His aggressive rhetoric on trade and immigration has already complicated ties with Canada and Mexico. Trump has warned of steep tariffs unless cross-border migration and drug trafficking are curtailed, a threat that would strike at Canada’s most important trading relationship if enacted.

Market strategists say the tone set in the first weeks of the new U.S. administration will be important. If the administration adopts a confrontational stance and ignores economic advice, tensions could rise quickly. At the same time, observers note that some of the rhetoric may be negotiating strategy: public threats can create leverage at the negotiating table, even if they are not ultimately implemented.

Practical concerns will limit the scope of any punitive measures. Tariffs on Canadian oil and gas or on auto parts that cross the border multiple times would raise costs for U.S. consumers and manufacturing supply chains, making such measures difficult to sustain. Still, uncertainty about policy direction will affect corporate planning and investment decisions.

Separately, the Canada–U.S.–Mexico trade agreement (CUSMA) is scheduled for review in 2026, and preparations for that review are expected to begin in 2025. Those talks will shape rules on trade, investment and cross‑border commerce for years to come.

Stock markets: Can Canadian stocks keep pace with the S&P 500?

Canada’s main stock index hit record highs in 2024, surpassing 25,000 points for the first time as financial and technology companies helped drive gains. Looking ahead, U.S. policy moves—such as corporate tax cuts or deregulation—could boost American equities and spill over into Canadian markets because of the close economic relationship between the two countries.

Canadian stocks have trailed the S&P 500 at times, but that gap narrowed in 2024. Valuation and earnings expectations suggest there is room for further upside in Canadian equities if corporate earnings improve and global growth remains on track. Investors will monitor interest rate trends, corporate earnings reports and cross‑border political developments as key drivers of relative performance.

Canadian politics: A federal election in 2025

Canada faces its own political turning point with a federal election due sometime in 2025. Polling in late 2024 showed the Conservatives with a strong lead that could translate into a majority government, although the timing of an election could hinge on budget timing or other parliamentary dynamics. The latest fixed date for a general election is Oct. 20, 2025.

The Conservative platform centers on rolling back the federal carbon tax and cutting spending, offering a contrast to the incumbent Liberals. They have also proposed reversing the government’s plan to cap emissions in the oil and gas sector—a move the industry argues would effectively limit production and cost jobs. The outcome of the election will have clear implications for energy policy, environmental regulation and fiscal strategy.

Real estate: When will the housing market recover?

Mortgage rates have begun to fall, but the housing market’s recovery has been gradual. High prices in major cities continue to put homeownership out of reach for many families. The Bank of Canada cut its policy rate five times in 2024, bringing it to 3.25%, and major banks have trimmed their prime rates, lowering costs for variable-rate mortgages and other floating-rate loans.

Real estate professionals say 2024 was a weak year for housing activity, but they expect renewed buyer interest in 2025 as affordability improves and sidelined buyers return to the market. That said, few expect a return to the overheated conditions of 2021–2022: a measured price recovery and more balanced demand appear more likely than a rapid rebound.

Labour: Unions and government intervention in disputes

Labour unrest was a major story in 2024 as unions sought to reclaim purchasing power lost during the inflation surge. High‑profile disputes at railways and ports prompted federal intervention, with the government directing the industrial relations board to order a return to work and, in some cases, sending negotiations to binding arbitration.

Several unions have challenged those government actions in court, arguing that forced settlements undermine collective bargaining rights. Even though inflation has cooled, some unions still need to renew contracts that covered peak inflation periods and may press for higher wages to restore real incomes. How government policy and court rulings evolve will shape labour relations and the risk of future work stoppages.

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