Deloitte Canada has reduced its growth projection for the country’s economy in 2027 by 20 per cent, attributing the adjustment to increasingly challenging circumstances for both consumers and businesses.
The accounting firm’s most recent forecast arrives as a new U.S. ban on specific Canadian imports took effect on Tuesday.
Deloitte anticipates that the repercussions of recent escalations in the trade conflict between Canada and the U.S. will lead to a significant economic downturn in the last quarter of this year and into early 2027.
According to Chief Economist Dawn Desjardins, the burden of billions in U.S. tariffs, along with Canada’s retaliatory actions, will not be evenly distributed across the Canadian economy, impacting some sectors severely while allowing others to thrive. Additionally, she noted that the federal government’s financial support, investment strategies, and defense expenditures signal potential growth in targeted areas.
“For some, it’s akin to the ground shifting beneath them — and not in a favorable direction. Conversely, other sectors are likely to experience growth and job creation,” Desjardins explained in an interview with CBC News before the report was published on Tuesday.
The newest economic forecast from Deloitte predicts a GDP growth of 1.6 per cent for 2027. In late June, the firm was expecting a two per cent growth for the following year.
Currently, Deloitte estimates Canada’s economy will grow by 0.9 per cent in 2026, showing a minor improvement from its earlier June prediction of 0.7 per cent.
“There’s a lot of uncertainty surrounding the various challenges Canadian companies face, including the possibility of increased costs, more friction with our largest trading partner, and potentially higher interest rates. All of these elements contribute to a very unpredictable environment,” Desjardins stated.
“Consequently, we believe the economy is likely to follow a slower growth path.”
U.S. ban on certain Canadian imports
The trade conflict between Canada and the U.S. escalated on Tuesday as U.S. President Donald Trump’s administration stopped American imports of Canadian alcohol, motorcycles, molasses, and whey products. Earlier this month, the White House also added more Canadian items to the list facing 50 per cent tariffs.
“We’re going to win everything,” Trump told journalists in the Oval Office on Monday, suggesting that it is Canada that has been unfair to the U.S.
“I believe that in the next three or four weeks, they will approach us…. They will come and say, ‘Sir, we apologize.’ I expect a deal to be made, but it will be a fair agreement.”
On Monday, Trump highlighted plans for a substantial $15-billion U.S. steel plant to be constructed in Iowa as proof that his tariff strategies against Canada are effective. This announcement coincided with reports of layoffs at a Hamilton, Ont. steel mill owned by a U.S. company.
Washington’s ban on several Canadian goods, including alcohol, molasses, motorcycles and select dairy products kick in as of Sept. 29. The list of items might come across as a head-scratcher to some but one trade lawyer suggests there’s more to this collection than meets the eye.
Desjardins notes that the current prolonged period of economic uncertainty is affecting both consumers and businesses.
“There are factors that are making us hesitate in terms of our confidence to spend money right now,” she remarked.
“Canadians are likely to boost their savings slightly and be more careful with their expenditures. As a result, this indicates a significantly slower growth pace.”
Canada’s economic growth stagnant in July
On the same day, Statistics Canada announced that the GDP growth for July was virtually unchanged from the prior month, following three months of economic expansion.
“The goods-producing industries remained mostly stable in July, as gains in construction and utilities were offset by declines in other sectors,” the agency reported.
“The services-producing industries also showed little change, with growth in several areas countered by decreases in retail and wholesale trade.”
Statistics Canada’s preliminary estimate for August suggests GDP growth may resume at 0.2 per cent, with mining and retail sectors somewhat balancing out declines in oil and gas extraction.
Andrew Grantham, a senior economist at CIBC, remarked that the flat July figure was anticipated, as the economy cooled following a strong performance in the second quarter. Like Desjardins, he is now considering the implications of the latest tariffs.
“Given the rise in U.S. trade uncertainty at the end of August, today’s data may be seen as outdated,” he noted in a research update after the report’s release.
For the Bank of Canada, Grantham believes attention will now turn to the September jobs report, scheduled for release on Oct. 9, along with the inflation data for the previous month, due on Oct. 19. The central bank is set to announce its next interest rate policy decision on Oct. 28.
Earlier this month, Bank of Canada Governor Tiff Macklem characterized Canada-U.S. tariffs as “very steep,” but “applicable to a relatively narrow base” within the economy. Bank policymakers expressed a desire for a “broadening recovery” as they chose to keep rates unchanged for the seventh consecutive meeting.
“Our base case remains for the Bank to maintain interest rates until the end of 2026 before gradually increasing them in 2027,” RBC economist Abbey Xu stated on Tuesday. “However, recent communications from the Bank of Canada have indicated that the risks surrounding this base case lean towards earlier rate hikes rather than later.”
