Canada’s elevated 87.7% market-implied probability of recession before 2027 reflects persistent structural headwinds that have kept growth forecasts subdued at 1.1–1.8% for 2026. Key drivers include ongoing adjustment to U.S. tariffs, the upcoming CUSMA renegotiation, and restrictive immigration policies that are expected to shrink the labor force by roughly 0.2% this year, weighing on domestic demand and per-capita output. Recent data show a Q4 2025 GDP contraction followed by a modest Q1 rebound, while unemployment remains elevated near 7%. The Bank of Canada’s April Monetary Policy Report projects only moderate expansion as the central bank holds its policy rate near 2.25%, with limited room to offset external shocks. These factors create a narrow margin for error against further downside surprises through 2026.