Deloitte Canada has revised its growth forecast for the Canadian economy in 2027, reducing it by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment in the accounting firm’s outlook coincides with the recent implementation of a new American ban on specific Canadian imports.
The escalation in the Canada-U.S. trade war is expected to lead to a significant economic slowdown in the final quarter of this year and the beginning of 2027. Deloitte’s chief economist, Dawn Desjardins, highlighted that the impact of billions of dollars in U.S. tariffs and Canada’s retaliatory measures will affect different sectors of the Canadian economy unevenly. Despite this, Desjardins noted positive signals for targeted growth stemming from the federal government’s fiscal supports, investment initiatives, and defense spending.
Deloitte’s latest economic projection anticipates a 1.6 percent growth in Canada’s GDP for 2027, a downgrade from its previous expectation of 2 percent growth. The firm also revised its 2026 forecast to a 0.9 percent expansion, showing a slight improvement from its earlier estimate of 0.7 percent.
Desjardins expressed concerns about the uncertain environment faced by Canadian companies, citing factors such as potential cost increases, trade friction with the U.S., and the likelihood of higher interest rates. These uncertainties are expected to lead to a slower growth trajectory for the economy.
The Canada-U.S. trade conflict escalated further as the U.S. administration imposed bans on certain Canadian products, including alcohol, motorcycles, molasses, and whey. President Donald Trump asserted that the U.S. would emerge victorious in the trade dispute, emphasizing the need for a fair deal with Canada.
Highlighting the economic uncertainty prevalent today, Desjardins emphasized the impact on consumer confidence and spending behavior. She predicted that Canadians would become more cautious with their spending, leading to a slower pace of economic growth.
In other news, Statistics Canada reported that Canada’s GDP growth in July remained stagnant compared to the previous month, following three consecutive months of economic expansion. The agency noted that while the goods-producing industries showed minimal change, the services-producing sector remained flat with some sectors experiencing declines.
Looking ahead, economists are closely monitoring the impact of the recent tariffs on the Canadian economy. The Bank of Canada is focusing on upcoming data releases, including the September jobs report and October inflation figures, as it prepares for its next interest rate decision.
While the Bank of Canada has maintained its interest rates in recent meetings, there are growing concerns about potential earlier rate hikes due to risks associated with the current economic climate.