Deloitte Canada has reduced its growth projection for Canada’s economy in 2027 by 20%, attributing this adjustment to challenging conditions for consumers and businesses. The accounting firm’s updated forecast coincides with a recent American ban on specific Canadian imports that came into effect on Tuesday.
The repercussions of the escalating Canada-U.S. trade conflict are expected to lead to a significant economic slowdown in the last quarter of this year and the beginning of 2027, according to Deloitte. Chief economist Dawn Desjardins noted that the impact of billions of dollars in U.S. tariffs and Canada’s countermeasures will vary across different sectors of the Canadian economy. While some sectors will face challenges, others are poised for growth and job creation, driven by federal government supports, investment initiatives, and defense spending.
Deloitte’s latest economic outlook predicts a 1.6% GDP growth for Canada in 2027, down from the previous estimate of 2% made in late June. The firm also revised its 2026 growth forecast to 0.9%, showing a slight improvement from the previous estimate of 0.7%. Desjardins emphasized the uncertainty faced by Canadian companies due to factors such as potential cost increases, trade friction with the U.S., and rising interest rates, leading to a more cautious economic environment and slower growth trajectory.
The Canada-U.S. trade tensions escalated on Tuesday as the U.S. administration imposed bans on certain Canadian products, including alcohol, motorcycles, molasses, and whey. President Donald Trump expressed confidence in the U.S.’s stance, stating that Canada has been treating the U.S. unfairly and predicting a fair deal to be reached in the near future. Trump’s tariff policies were highlighted with the announcement of a new $15-billion U.S. steel plant project in Iowa, coinciding with job cuts at a steel mill in Hamilton, Ontario, owned by a U.S. company.
Desjardins highlighted the ongoing economic uncertainty affecting consumers and businesses, leading to increased savings and cautious spending behavior among Canadians, resulting in a slower pace of economic growth. In other news, Statistics Canada reported that Canada’s GDP growth in July remained flat after three months of expansion, with the goods-producing and services-producing industries showing mixed performances.
Looking ahead, economists like Andrew Grantham are monitoring the impact of recent tariffs on the economy, with a focus on upcoming economic data releases such as the September jobs report and inflation figures for last month. The Bank of Canada is expected to maintain interest rates until the end of 2026 before potentially raising them in 2027, as communicated in recent statements by Governor Tiff Macklem and echoed by economists like RBC’s Abbey Xu.
The economic landscape remains uncertain, with key indicators and policy decisions shaping the future trajectory of Canada’s economy amid the evolving trade dynamics with the U.S.