Deloitte Canada has reduced its growth prediction for the Canadian economy in 2027 by 20 percent, attributing this adjustment to increasingly challenging circumstances for both consumers and businesses.
The most recent forecast from the accounting firm comes on the heels of a newly implemented American ban on specific Canadian imports that started Tuesday.
Deloitte anticipates that the repercussions of the recent intensification of the Canada-U.S. trade conflict will lead to a significant economic downturn in the last quarter of this year and into early 2027.
Dawn Desjardins, the chief economist, explained that the burden of billions in U.S. tariffs and Canada’s countermeasures will not be distributed evenly across the economy; while some sectors may suffer, others could thrive. Additionally, she noted that the federal government’s financial supports, investment initiatives, and defense spending are encouraging indicators for specific growth areas.
“For some, it feels like the ground is shifting beneath them — and not in a good way. However, in other industries, growth and job creation can be expected,” Desjardins shared with CBC News during an interview before the report was made public on Tuesday.
Deloitte’s recent economic forecast for Canada predicts a GDP growth of 1.6 percent in 2027, a decrease from the two percent growth expectation shared in late June for the following year.
The firm currently anticipates that Canada’s economy will grow by 0.9 percent in 2026, a slight improvement from its previous June projection of 0.7 percent.
“There is a lot of uncertainty regarding the various challenges Canadian companies are facing, including potential rising costs, increasing tensions with our largest trading partner, and possibly higher interest rates. All these elements contribute to a very unpredictable environment,” Desjardins stated.
“Consequently, we believe that the economy is likely to follow a slower growth path.”
U.S. prohibition on certain Canadian imports
On Tuesday, the trade conflict between Canada and the U.S. escalated from tariffs to outright prohibitions on various products, as U.S. President Donald Trump’s administration banned American imports of Canadian alcohol, motorcycles, molasses, and whey products. Earlier this month, the White House also expanded the list of Canadian goods subject to 50 percent tariffs.
“We’re going to win everything,” Trump remarked to reporters in the Oval Office on Monday, indicating that Canada has treated the U.S. unfairly.
“I believe that over the next three or four weeks, they will come to us… They will approach and say, ‘Sir, we apologize.’ I think an agreement will be reached, but it will be a fair one.”
On Monday, Trump highlighted plans for a large $15-billion U.S. steel facility to be established in Iowa as proof that his tariff strategy against Canada is yielding results. His announcement coincided with news of job losses at a steel mill in Hamilton, Ontario, owned by a U.S. firm.
Washington’s ban on multiple Canadian products, including alcohol, molasses, motorcycles, and certain dairy items, commenced on September 29. Although the list may appear puzzling to some, a trade lawyer suggests there is more to this assortment than meets the eye.
Desjardins comments that the ongoing economic uncertainty is affecting both consumers and businesses alike.
“There are factors that are causing us to hesitate about whether we should be spending our money right now,” she remarked.
“Canadians are likely to boost their savings a bit and will be more cautious with their expenditures. This suggests a significantly slower growth rate.”
Canada’s economic growth stagnant in July
On the same day, Statistics Canada announced that GDP growth for July was virtually unchanged from the previous month, following three months of economic growth.
“The goods-producing sectors remained largely stable in July, with gains in construction and utilities offset by declines in other areas,” the agency indicated.
“The services-producing sectors were also mostly flat, as increases in several areas were counterbalanced by drops in retail and wholesale trade.”
Statistics Canada’s preliminary estimate for August suggests a return to growth at 0.2 percent; the mining and retail sectors are expected to mitigate declines in oil and gas extraction.
Andrew Grantham, a senior economist at CIBC, noted that the stagnant figure for July was anticipated, as the economy cooled after a strong performance in the second quarter. Like Desjardins, he is now focused on the implications of the recent tariffs.
“Considering the rise in U.S. trade uncertainty towards the end of August, today’s data will likely be regarded as outdated,” he expressed in a research note after the data release.
For the Bank of Canada, Grantham mentioned that attention is now directed towards the September jobs report, which is scheduled for release on October 9, and the inflation figures for the previous month that will be available on October 19. The central bank’s next interest rate policy decision is set for October 28.
Earlier this month, Bank of Canada Governor Tiff Macklem characterized the Canada-U.S. tariffs as “very steep,” but “applicable to a relatively limited segment” of the economy. Bank policymakers called for a “broadening recovery” in the economy while they decided to maintain rates steady for the seventh consecutive meeting.
“Our baseline expectation is for the Bank to keep interest rates stable until the end of 2026, before gradually increasing them in 2027,” RBC economist Abbey Xu commented on Tuesday. “However, recent communications from the Bank of Canada indicate that the risks around this expectation lean towards earlier rather than later rate hikes.”