Tariff worries (and annexation worries) are really hitting Canada hard, at least in terms of sentiment. People are pulling back on spending and companies pulling back on investment.

Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence said:

"The considerable uncertainty related to tariffs being applied on all goods passing across the Canada-United States border weighed heavily on the manufacturing economy during February. Output fell noticeably, driven lower by a steeper decline in new orders as product markets, both at home and abroad, were paralysed by concerns over the applicability and size of tariffs in the coming months.
"Understandably, manufacturers grew increasingly downbeat about the future, with confidence at its lowest level since a series record low was registered in April 2020. This meant firms also adopted an increasingly cautious approach to purchasing and employment, with cuts made in each case since January.
"Adding to the general woes was an acceleration in input price inflation to its highest in nearly two years, with costs rising on the back of a stronger US dollar and, in some cases, vendors raising prices ahead of possible changes to tariffs in the months ahead."

These comments suggest it's not just sentiment but output.

Source: Forex Live