Tariff worries (and annexation worries) are really hitting Canada hard, at least in terms of sentiment. People are pulling back on spending and companies pulling back on investment.

Commenting on the latest survey results, Paul Smith,
Economics Director at S&P Global Market Intelligence
said:

“The considerable uncertainty related to tariffs being
applied on all goods passing across the Canada-United
States border weighed heavily on the manufacturing
economy during February. Output fell noticeably, driven
lower by a steeper decline in new orders as product
markets, both at home and abroad, were paralysed by
concerns over the applicability and size of tariffs in the
coming months.

“Understandably, manufacturers grew increasingly
downbeat about the future, with confidence at its lowest
level since a series record low was registered in April
2020. This meant firms also adopted an increasingly
cautious approach to purchasing and employment, with
cuts made in each case since January.

“Adding to the general woes was an acceleration in input
price inflation to its highest in nearly two years, with
costs rising on the back of a stronger US dollar and, in
some cases, vendors raising prices ahead of possible
changes to tariffs in the months ahead.”

These comments suggest it’s not just sentiment but output.