Canada’s economy staged a stronger-than-expected recovery in the third quarter of 2025, expanding 2.6 per cent year-on-year after a contraction in the previous quarter, according to new data from Statistics Canada, AFP reported.The rebound was fuelled by an improved trade balance and higher government spending, offsetting the drag from US President Donald Trump’s trade war, which has weighed on Canadian growth and clouded the country’s trade outlook.

CIBC economist Katherine Judge said the print “was well above the consensus forecast,” noting that analysts had broadly expected growth of around 0.5 per cent.Statistics Canada said the improvement was led by declines in imports alongside a slight uptick in exports. “Imports dropped and exports edged up. Increased capital investment was driven by government capital spending, as business investment was flat,” the agency said.The drop in imports was the largest since 2022, the agency added.A sharp rise in federal outlays also contributed to the growth momentum, with government spending on weapons systems surging 82 per cent. Since taking office in March, Prime Minister Mark Carney has prioritised upgrading Canada’s ageing military hardware, arguing that significant investments are essential for meeting NATO spending targets and safeguarding sovereignty amid rising threats, including from Russia in the Arctic.