The Bank of Canada's second-quarter 2025 Business Outlook Survey reveals that tariffs and related uncertainties continue to significantly impact businesses' outlooks. However, the likelihood of worst-case scenarios previously envisioned by firms has decreased.

"Tariffs and related uncertainty, along with spillover effects on the Canadian and global economies, continue to have major impacts on businesses’ outlooks. However, the worst-case scenarios that firms envisioned last quarter are now seen as less likely to occur."

Despite a general pessimism about sales due to economic slowdown concerns, some improvement is noted among exporters who report limited direct effects from current tariffs. Hiring and investment plans remain cautious amid ongoing uncertainty.

"Uncertainty continues to drive cautiousness in outlooks for hiring and investment. Most firms expect to maintain current staffing levels and limit investment to regular maintenance over the next 12 months."

Firms experiencing cost increases due to tariffs find it challenging to pass these costs onto customers because of weak demand and competition pressures.

"For some, cost increases due to tariffs and trade uncertainty have materialized. Affected firms see weak demand and competition as constraining their ability to pass cost increases on to their customers, although most still plan for some pass-through."

While many businesses reported difficulties in forecasting conditions due to uncertainty around financial, economic, and political situations, business sentiment has improved since declines earlier in 2025.

"Business sentiment, although still subdued, has improved from the sharp declines recorded in March and April 2025."

In terms of future sales expectations, more firms report deterioration compared with last year due mainly to broad spillover effects from trade conflicts affecting various sectors like oil and gas.

"Firms’ near-term sales expectations weakened in the second quarter of 2025. The balance of opinion on indicators of future sales has turned negative as tariff-related impacts have materialized."

Investment intentions remain muted with many companies focusing investments on routine maintenance rather than expansion or productivity improvements.

"Firms’ investment intentions remain muted this quarter... More firms than usual are focusing their investments on routine maintenance rather than expanding capacity or improving productivity."

Hiring plans also show restraint; fewer companies plan workforce increases despite diminished concerns over tariffs impacting hiring decisions.

"Hiring intentions remain subdued. Fewer firms than usual plan to increase their labour force over the next year..."

Cost pressures from trade tensions persist as approximately half report facing additional tariff-related costs which they struggle passing onto consumers without compromising profit margins or market share.

"Cost pressures continue... Roughly half of firms reported already facing additional tariff-related costs... But competitive pressures... are limiting firms’ ability..."

Near-term inflation expectations have stabilized at late-2024 levels after recent rises driven by tariffs while longer-term projections stay within targets set by Bank authorities.

"Near-term inflation expectations have come back down... Like last quarter, tariffs are the primary driver..."

Survey results represent respondent opinions but do not necessarily reflect Bank policy positions nor official views regarding economic matters across Canada today.