Deloitte Canada has revised down its growth projection for Canada’s economy in 2027 by 20 percent due to challenging conditions for consumers and businesses. This adjustment in forecast coincides with a new American ban on specific Canadian imports, exacerbating the ongoing Canada-U.S. trade tensions.
The escalation in the trade war between the two countries is expected to lead to a significant economic slowdown towards the end of this year and into early 2027, according to Deloitte’s chief economist, Dawn Desjardins. The impact of billions of dollars in U.S. tariffs and Canada’s retaliatory measures will vary across different sectors of the Canadian economy, with some industries facing hardships while others may see growth opportunities. Desjardins highlighted that the federal government’s fiscal support, investment programs, and defense spending could provide a boost to targeted sectors.
Deloitte’s latest economic outlook predicts a 1.6 percent GDP growth for Canada in 2027, a downgrade from the initial forecast of 2 percent growth earlier in the year. The firm also anticipates a 0.9 percent growth rate for 2026, showing a slight improvement from its previous estimate of 0.7 percent.
Desjardins expressed concerns about the uncertain business environment, citing factors such as potential cost increases, trade frictions, and higher interest rates that are creating challenges for Canadian companies. She emphasized that these uncertainties are likely to result in a slower growth trajectory for the economy.
Furthermore, the Canada-U.S. trade dispute has escalated from tariffs to bans on certain products, with President Donald Trump’s administration halting imports of Canadian alcohol, motorcycles, molasses, and whey products. Trump’s statements regarding the trade conflict and his claims of achieving victories through tariffs have added to the economic uncertainties.
The prolonged economic uncertainty is impacting both consumers and businesses, leading to cautious spending behavior and a slower pace of growth in Canada. Statistics Canada reported stagnant GDP growth in July following three consecutive months of expansion, with the mining and retail sectors expected to offset declines in other industries in the coming months.
Looking ahead, economists are closely monitoring the impacts of the latest tariffs on the economy. The Bank of Canada’s upcoming decisions on interest rates will be influenced by key economic indicators such as the September jobs report and inflation data for last month. While the central bank has maintained a hold on rates, there are signals indicating a possible earlier than expected rate hike.
Overall, the economic landscape in Canada remains uncertain amid trade tensions and global economic challenges, prompting a cautious outlook for future growth prospects.