Trade turbulence: Alberta's economy shifts to a slower gear

ATB Financial Quarterly Economic Outlook

EDMONTON, AB, March 20, 2025 /CNW/ - Alberta's economy was gaining momentum when escalating trade tensions significantly altered the economic landscape. ATB Financial's latest economic forecast predicts a period of slower growth and an increased unemployment rate. This is a direct result of heightened uncertainty amid President Trump's tariff threats, reducing export demand and leading to a more cautious stance by businesses and consumers. Leading indicators across Canada on sentiment reveal an expected pullback in business investment plans and consumer spending. Economic policy uncertainty is at the highest level recorded, exacerbated by the 'on and off' nature of U.S. tariff policies and domestic policies in flux with a federal election looming.

"The Alberta economy had shown promising signs of recovery, driven by improvements in the energy sector, residential construction, and fast-growing industries like technology and petrochemicals," says ATB Financial's Chief Economist, Mark Parsons. "However, increased trade uncertainty has encouraged businesses and consumers to adopt a more cautious, 'wait and see' approach."

Given the unprecedented level of uncertainty, ATB Financial's economic outlook includes three economic scenarios: a base case, a pessimistic tariff scenario, and an optimistic tariff scenario.

• Base Case: Real GDP growth of 1.5 per cent in 2025 and 1.9 per cent in 2026, with unemployment averaging 7.6 per cent this year.
• Pessimistic Tariff Scenario: Assumes broad-based U.S. tariffs and additional steel and aluminum tariffs and countertariffs are in effect until mid-2026. This scenario projects growth slowing to 0.5 per cent in 2025 and 1.3 per cent in 2026.
• Optimistic Tariff Scenario: Assumes short-lived tariffs followed by a new trade agreement, albeit potentially less favorable than the current Canada-U.S.-Mexico Agreement (CUSMA - the current free trade agreement between Canada, the U.S., and Mexico). This scenario anticipates growth of 2.7 per cent in 2025 and 2.4 per cent in 2026.

Despite the challenges, Alberta is projected to outperform the rest of Canada, which is expected to grow at only 0.6 per cent this year in the base case. Alberta's energy sector, supported by strong balance sheets and access to new Asian markets, is anticipated to continue expanding despite facing a 10 per cent tariff. Tourism is also expected to be a bright spot, driven by a weaker Canadian dollar and increased domestic travel. Continued interprovincial migration will provide an uplift to housing and consumer spending.

"The current trade environment has served as a wake-up call, highlighting the need to address long-standing economic challenges in Canada, such as interprovincial trade barriers, getting major projects built, and diversification into new export markets," added Parsons.

While the trade war will undoubtedly cause economic strain, the Alberta economy has demonstrated resilience in the past and is expected to navigate through this period of uncertainty.

About ATB Financial
With $65.5 billion in assets, ATB Financial is a leading financial institution that started in Alberta with the focus of putting people first. Our success comes from our more than 5,000 team members who love to deliver exceptional experiences to over 830,000 clients across our Personal and Business Banking, ATB Wealth Management and ATB Capital Markets businesses. ATB provides expert advice, services and products through our many branches and agencies, our 24-hour Client Care Centre, four entrepreneur centres and our digital banking options. ATB powers possibilities for our clients, communities and beyond. ATB is bronze certified as part of the Partnership Accreditation in Indigenous Relations commissioned by the Canadian Council for Indigenous Business. More information about ATB can be found at atb.com.

General Disclosure
ATB Financial's Economic Outlook is intended for general information and educational purposes only and should not be considered specific legal, financial, tax or other professional advice or recommendations. Information presented is believed to be reliable and up-to-date but it is not guaranteed to be accurate or a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the authors as of the date of publication and are subject to change. The actual outcome may be materially different. ATB Financial and any of its affiliates are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by ATB Financial or any of its affiliates and related entities.

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SOURCE ATB Financial