Deloitte Canada has reduced its growth projection for Canada’s economy in 2027 by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment in the forecast coincides with a recent American ban on specific Canadian imports, leading to a significant economic slowdown expected in the final quarter of this year and the beginning of 2027 as a result of escalating tensions in the Canada-U.S. trade war.
Chief economist Dawn Desjardins highlighted the uneven impact of billions of dollars in U.S. tariffs and Canada’s retaliatory measures on different sectors of the Canadian economy. While some industries will face significant challenges, others are poised for growth and job creation. Desjardins emphasized that the federal government’s fiscal support, investment strategies, and defense spending could stimulate targeted growth.
Deloitte’s updated economic outlook predicts a 1.6 percent GDP growth for Canada in 2027, a decrease from its previous forecast of 2 percent. The firm also revised its 2026 projection, now expecting a 0.9 percent growth rate, a slight improvement from the earlier estimate of 0.7 percent.
Desjardins expressed concerns about the uncertain business environment due to various factors affecting Canadian companies, such as potential cost increases, trade disputes with the U.S., and the prospect of higher interest rates. This uncertainty is expected to lead to a slower growth trajectory for the economy.
In parallel, the Canada-U.S. trade war has escalated from tariffs to bans on specific products, including Canadian alcohol, motorcycles, molasses, and whey products by the U.S. government. President Donald Trump touted these measures as part of his strategy to address what he perceives as unfair treatment of the U.S. by Canada. Amid these developments, the economic uncertainty has led to cautious consumer spending and a slower pace of economic growth.
Statistics Canada reported stagnant GDP growth in July after three consecutive months of expansion. The agency noted that while the goods-producing industries remained unchanged, the services-producing sector experienced fluctuations. Analysts are closely monitoring the impact of the latest tariffs on the economy, with a focus on upcoming economic indicators like the September jobs report and October inflation data.
The Bank of Canada remains cautious about the economic recovery, with policymakers maintaining interest rates steady for the seventh consecutive meeting. Despite the current stance, there are indications of potential rate hikes sooner than anticipated based on recent communications from the central bank.