Canadians Cutting Back on Spending Amid Trade Tensions With US: TD Report

TD Bank signage is pictured in the financial district in Toronto in a file photo. The Canadian Press/Andrew Lahodynskyj

Canadians have been cutting back on spending due to “escalating” trade tensions with the United States and the uncertainty surrounding American tariffs, a new report from TD Economics suggests.

“The latest TD debit and credit card spending data suggest that Canadian consumers hit pause in the second quarter of 2025, reacting to escalating trade tensions,” the recently-released report says.

TD’s spend data indicates that credit card spending increased by 1.5 percent in the second quarter this year compared to that of last year, however this marks a decrease from the 5.4 percent growth in the first quarter this year. The report says this decline reflects a “growing softness in underlying economic conditions—especially the weakening labour market.”

TD Economics is lowering its personal consumption expenditure prediction for the rest of the year by 0.4 percentage points, although it does expect “some recovery” toward the end of the year.

“Consumers [are] unlikely to splurge on large purchases when they’re worried about losing their jobs,” the report says. “Said plainly: the damage is done.”

The report suggests this can be partly linked to diminished spending at gas stations this spring relative to the previous year. Prices fell by 18.1 percent in April after the elimination of the consumer carbon tax by Prime Minister Mark Carney.

However, the report also notes that Canadians spent less money at supermarkets, liquor stores, clothing retailers, and general merchandise stores in the second quarter this year. Home-related purchases also experienced a “sizeable” decline.

Services spending also dipped in the second quarter this year, the report says, with travel spending falling 4.4 percent in May compared to the same period last year.

“This likely reflects a shift away from U.S. trips—which account for a sizeable share of total trips—towards lower-cost domestic destinations,” the report says.

Year-over-year spending growth was strongest in Saskatchewan, Canada’s territories, and Quebec, the report indicates, adding that all other provinces are tracking below the national average. The provinces that are most exposed to international trade, including Ontario, Quebec, B.C., and Manitoba will “continue to absorb much of the shock this year.”

TD’s Canadian Quarterly Economic Forecast report published last month said the global economy “continues to ride the tariff rollercoaster,” and suggested that Canada’s economy would contract through the middle of the year, with the unemployment rate reaching its highest level since 2012.

“The impact of tariffs on Canada’s economy is clear in the economic data,” the forecast said. “Most directly, exports to the U.S. have plummeted after surging through the winter.” Exports are down 14 percent compared to last April, the report noted.

Canadians have stayed away from major purchases including homes and vehicles as they “worry about losing their jobs or facing lower revenues in their businesses,” the report echoed, adding that the impact of tariffs on the Canadian economy is “clear in the economic data.”