Deloitte Canada has reduced its growth prediction for the nation’s economy in 2027 by 20 percent, attributing this adjustment to increasingly challenging circumstances for both consumers and businesses.
The accounting firm’s most recent forecast coincides with a new U.S. prohibition on certain Canadian imports that took effect on Tuesday.
Deloitte anticipates that the repercussions of the latest increases in the Canada-U.S. trade conflict will lead to a significant economic slowdown in the last quarter of this year and into early 2027.
Dawn Desjardins, the chief economist, indicated that the burden of billions of dollars in U.S. tariffs, coupled with Canada’s countermeasures, will not impact all sectors of the Canadian economy equally. Some will experience severe setbacks, while others may thrive. Nonetheless, she noted that the federal government’s fiscal assistance, investment programs, and defense spending are encouraging signs for certain growth areas.
“For some, it feels as if the ground is shifting beneath them — and not in a good way. Conversely, in other sectors, we can expect growth and job creation,” Desjardins mentioned in an interview with CBC News prior to the release of the report on Tuesday.
Deloitte’s recent economic forecast for Canada predicts a GDP growth of 1.6 percent in 2027, down from an earlier estimate of 2 percent for the following year made in late June.
The firm currently projects Canada’s economy to expand by 0.9 percent in 2026, a slight rise from its previous June forecast of 0.7 percent.
“The uncertainty surrounding various factors Canadian companies are confronting—such as the potential for rising costs, increased tensions with our largest trading partner, or possibly higher interest rates—contributes to a very unpredictable environment,” Desjardins explained.
“Consequently, we believe that the economy is likely to follow a slower growth path.”
U.S. prohibition on select Canadian imports
On Tuesday, the trade conflict between Canada and the U.S. escalated from tariffs to outright bans on specific products, as U.S. President Donald Trump’s administration stopped the importation of Canadian alcohol, motorcycles, molasses, and whey products. Earlier this month, the White House also added additional Canadian goods to the list facing 50 percent tariffs.
“We are going to win everything,” Trump stated to reporters in the Oval Office on Monday, claiming that Canada has treated the U.S. unfairly.
“I believe that in the next three or four weeks, they will approach us… They will come in and say, ‘Sir, we apologize.’ I expect a deal will be reached, but it will be a fair one.”
On Monday, Trump promoted plans for a large $15-billion U.S. steel plant to be constructed in Iowa as proof that his tariff strategy against Canada is effective. This announcement coincided with news of layoffs at a steel mill in Hamilton, Ontario, owned by a U.S. company.
Washington’s ban on several Canadian goods, including alcohol, molasses, motorcycles, and select dairy products, took effect on September 29. The selection of items may seem puzzling to some, but one trade lawyer believes there are deeper implications behind this list.
Desjardins notes that the current wave of economic unpredictability is affecting both consumers and businesses.
“There are factors that are causing us to feel a bit uneasy regarding our confidence in spending our money right now,” she remarked.
“Canadians are likely to save more and be more careful with their expenditures. Therefore, this suggests a much slower growth rate ahead.”
Canada’s economic growth stagnant in July
Additionally, on Tuesday, Statistics Canada reported that GDP growth for July was nearly unchanged from the prior month, following three successive months of economic gains.
“The goods-producing sectors remained mostly stable in July, as growth in construction and utilities was countered by declines in other areas,” the agency reported.
“The services-producing sectors also remained virtually flat, as growth in various areas was offset by downturns in retail and wholesale trade.”
Statistics Canada’s preliminary estimate for August indicates that GDP is expected to grow by 0.2 percent; the agency anticipates that gains in mining and retail will partially compensate for decreases in oil and gas extraction.
Andrew Grantham, a senior economist at CIBC, stated that the stagnant July data was anticipated, considering the economy’s cooling following a strong performance in the second quarter. Similar to Desjardins, he is now focused on the potential effects of the new tariffs.
“Given the heightened U.S. trade uncertainties at the end of August, the current data will likely be regarded as outdated,” he commented in a research note after the data was published.
For the Bank of Canada, Grantham indicated 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, set for October 19. The central bank is slated to announce its next interest rate policy decision on October 28.
Earlier this month, Bank of Canada Governor Tiff Macklem referred to Canada-U.S. tariffs as “very steep” but noted they were “applied to a relatively narrow base” within the economy. Bank policymakers have called for a “broadening recovery” as they decided to maintain rates for the seventh consecutive meeting.
“Our baseline expectation remains that the Bank will keep interest rates steady through 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 baseline are skewed towards earlier rather than later hikes.”