TARIFF VICTIM #1 !! Canadian Manufacturing PMI Plunges to 47.8 in February

Canada’s manufacturing sector contracted sharply in February 2025, with the S&P Global Manufacturing Purchasing Managers’ Index (PMI) dropping to 47.8 from 51.6 in January, Reuters reported, citing the latest survey data. This 3.8-point decline—the lowest since July 2024—pushed the PMI below the 50 threshold, signaling a downturn after months of tentative growth. Economists, expecting a milder dip to 51.9, were caught off guard by the steep fall.

The slump follows a high of 52.2 in December 2024, when U.S. clients stockpiled goods ahead of anticipated tariffs under President Donald Trump’s administration, sworn in January. Reuters noted that February’s contraction reflects a drop in new orders, especially exports, as Trump’s threatened 25% tariffs on Canadian imports sparked uncertainty. Rising input costs, driven by a weaker Canadian dollar near 1.43 USD/CAD and preemptive price hikes from suppliers, further strained manufacturers, with inflation hitting a 10-month peak.

“The sector’s facing a double hit—trade fears and cost pressures,” an S&P Global analyst told Reuters. Output and staffing levels softened as firms scaled back, reversing January’s cautious optimism. Canada’s reliance on the U.S., which takes 75% of its manufacturing exports, amplifies the impact, setting it apart from stabilizing global trends.

The Bank of Canada, having cut rates to 3.75% since mid-2024, may face renewed calls for easing as growth falters. Business sentiment soured, with survey respondents citing “unprecedented uncertainty” over trade policy. While December’s PMI surge masked underlying fragility, February’s tumble lays bare the risks of external shocks. Analysts warn of broader economic fallout if tariffs materialize, with March’s PMI now critical to gauging the depth of this slide.