TORONTO, Canada, Feb 28, 2026 (BSS/AFP) - Canada's economy contracted by 0.6 percent in the fourth quarter of 2025, capping a year of modest growth when exports to the United States were hindered by US President Donald Trump's tariffs.

The contraction reported by Statistics Canada on Friday was slightly worse than predictions from analysts, who had forecast a 0.2 percent decline in Canada's GDP compared to the same period in 2024.

The national statistics agency put overall annualized growth for 2025 at 1.7 percent.

"Looking back at 2025, the economy appears to have navigated the global chaos and domestic headwinds quite well," Desjardins economist Royce Mendes said in a note.

Trump's protectionist policies veered in multiple directions through 2025, especially in the initial months following his return to office in January.

Broadly, the US president's global sectoral tariffs have caused major damage for the Canadian auto, steel, aluminum and lumber sectors, including job losses.

But Trump has so far adhered to most of the existing North American free trade deal he signed during his first term, meaning about 85 percent of US-Canada trade remains tariff-free.

Experts and Canada's central bank have highlighted the Canadian economy's resilience through a year of tariffs.

But the muted annual growth figure of 1.7 percent was "the slowest pace of annual growth since the decline in 2020 (because of the Covid-19 pandemic)," Statistics Canada said.

"Lower exports, particularly to the United States, were the main contributor to the slower rise in GDP in 2025," the agency said.