Deloitte Canada has revised its growth projection for Canada’s economy in 2027, reducing it by 20 percent due to challenging conditions for consumers and businesses. This adjustment comes in light of a recent American ban on specific Canadian imports.
The ongoing trade tensions between Canada and the U.S. are expected to lead to a significant economic slowdown in the last quarter of this year and the beginning of 2027, according to Deloitte’s chief economist, Dawn Desjardins. The impact of billions of dollars in U.S. tariffs and Canada’s corresponding measures will vary across different sectors of the Canadian economy, with some industries facing challenges while others see growth opportunities. Desjardins highlighted that the federal government’s financial support, investment projects, and defense expenditures are positive indicators for targeted growth.
Deloitte’s current economic outlook predicts a 1.6 percent GDP growth for Canada in 2027, down from the earlier forecast of two percent made in June. The firm anticipates a 0.9 percent growth in 2026, slightly higher than the previous estimate of 0.7 percent, attributing the uncertainty faced by Canadian companies to factors such as elevated costs, trade tensions with the U.S., and potential interest rate hikes.
In recent developments, the trade dispute between Canada and the U.S. has escalated from tariffs to bans on specific products. The Trump administration halted the import of Canadian alcohol, motorcycles, molasses, and whey products, with additional Canadian goods now subject to 50 percent tariffs. President Trump expressed confidence in the U.S.’s position and hinted at a potential deal with Canada amid the ongoing negotiations.
The prolonged economic uncertainty is affecting both consumers and businesses, leading to cautious spending and increased savings among Canadians. Statistics Canada reported flat GDP growth for July after three consecutive months of expansion, with the mining and retail sectors expected to counterbalance declines in oil and gas extraction. Economists are closely watching upcoming economic indicators, such as the September jobs report and October inflation data, to gauge the impact of the trade tensions on Canada’s monetary policy decisions.
Despite the challenges posed by the trade war, the Bank of Canada aims for a gradual recovery in the economy and has maintained interest rates for the seventh consecutive meeting. While the base case scenario suggests a rate hold through 2026 followed by incremental increases in 2027, uncertainties around this projection may lead to earlier rate adjustments, according to RBC economist Abbey Xu.
