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 comes following a recent American ban on specific Canadian imports.
The escalation of the Canada-U.S. trade conflict is expected to lead to a significant economic slowdown in the last quarter of this year and the early part of 2027, according to Deloitte’s chief economist Dawn Desjardins. Desjardins mentioned that while some sectors will face significant challenges due to U.S. tariffs and corresponding Canadian measures, others may experience growth and job creation. She highlighted the positive impact of the federal government’s fiscal support, investment initiatives, and defense spending on targeted growth.
Deloitte’s latest economic forecast predicts a 1.6 percent GDP growth for Canada in 2027, down from the previously projected two percent. The firm now anticipates a 0.9 percent growth in 2026, slightly better than the earlier estimate of 0.7 percent. Desjardins emphasized the uncertain environment faced by Canadian companies, including the potential for higher costs, increased friction with the U.S., and rising interest rates, leading to a slower growth trajectory for the economy.
The ongoing trade tensions between Canada and the U.S. have escalated with the U.S. imposing bans on certain Canadian products, including alcohol, motorcycles, molasses, and whey. President Donald Trump expressed confidence in the U.S.’s stance, suggesting that a fair deal will eventually be reached between the two countries. Trump’s administration has also highlighted the positive impact of tariffs on the U.S. steel industry, coinciding with layoffs at a steel mill in Hamilton, Ontario.
Desjardins noted that the prevailing economic uncertainty is affecting both consumers and businesses, leading to cautious spending and slower growth. Statistics Canada reported that GDP growth in July remained flat compared to the previous month, following three consecutive months of economic expansion. The agency expects a 0.2 percent growth in GDP for August, with the mining and retail sectors offsetting declines in oil and gas extraction.
Economists like Andrew Grantham from CIBC are closely monitoring the impact of tariffs on the Canadian economy, with a focus on upcoming economic indicators such as the September jobs report and October inflation data. The Bank of Canada is expected to maintain interest rates through the end of 2026 before considering gradual increases in 2027, despite the risks posed by trade uncertainties.
