Canadian corporations certainly have something to celebrate this holiday season as profits have risen despite tariff tensions.
In the third quarter, operating profits increased 3.8% to $200 billion (Statistics Canada), reflecting the fastest growth in two years.
In the financial sector, earnings rose 6% to $96 billion before interest and taxes. According to StatsCan, this was driven by lower provisions for credit losses and increased non-interest income in banking (higher investment revenues and higher net interest income).
Industries outside of finance also expanded their operating profits 1.9% between July and September. In total, 25/39 secondary industries saw increases with profits also rising in 10/14 manufacturing industries.
True, North, Strong and Free
The StatsCan data illuminates the resiliency of Canada’s companies in the face of turbulence with US trade policies — and an elevated unemployment rate.
Tariffs still exert a lot of pressure on steel, aluminum, autos and lumber products. The central bank anticipated sluggish economic growth in the latter half of 2025 with dragging business investment and exports.
On the bright side, many Canadian goods exported to the US are duty-free under the free trade agreement. This leaves Canada with a relatively low effective tariff rate (Financial Post).
“Tariffs are having a brutal but narrow hit,” said Fred Demers, head strategist of multi-asset solutions with BMO Global Asset Management.
“Firms are defending strong profit margins, and investors should remain comfortable,” he said.
But who truly profits?
While this is exciting and promising news for the Canadian economy, it is not to diminish or takeaway from the very real struggle that citizens are facing.
While corporations are seeing profits increase, who benefits?
As it stands, most of the wealth is further concentrated into the pockets of owners and shareholders.
Since around 2020, less than 10% of profits were reinvested by corporations into outlets like capital expenditures and while ~50% were distributed to owners/shareholders.
The reality is that the profit share of income, or the slice of national income going to capital owners versus labourers, has also increased Canada.
The struggle is real for Canadians
In recent years, the allocation of corporate profits have fallen under much greater scrutiny. High inflation triggered debates about the role of profit margins, generating terms like “greedflation” and “price gouging” levelled at corporations.
The way corporations profit from inflation became more widely recognized. An analysis of 4,550 publicly-listed corporations had 33% record operating profits in 2021–2022.
In addition, corporations with pricing power were found to be actively worsening inflation by hiking their profit margins.
Canadians for Tax Fairness strives to dispel what they deem the myth “that higher corporate profits lead to higher corporate investment”.
They argue that non-financial corporations didn’t boost investments in the Canadian economy, despite doubled profits after the pandemic.
The wealth gap widens
Average non-financial corporate investment was $205.9 billion/year from 2010-2019 and $205.1 billion from 2021 to 2023.
Instead, Canadians for Tax Fairness state that firms use higher profits to repurchase their own shares and pay dividends. This cycle inflates returns for shareholders without leading to higher wages or productive investment that could enhance future growth.
In 2023, dividends and share repurchases were 68.2% of non-financial corporations’ net profits (NUPGE).
There are strong arguments on both sides, that of corporations and Canadians fed up with economic strife, for and against the why profits are purposed.
What is key, is to always ask who is reaping the benefits and why. What do you think? Is corporate greed stunting greater economic growth or is profit generation accelerating it?
