Deloitte Canada has revised down its growth projection for Canada’s economy in 2027 by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment follows the implementation of a new American ban on specific Canadian imports.
The trade tensions between Canada and the U.S. are expected to result in a significant economic slowdown in the final quarter of this year and into early 2027, according to Deloitte’s chief economist, Dawn Desjardins. The impact of billions of dollars in U.S. tariffs and Canada’s retaliatory measures will vary across sectors, causing some to struggle while others thrive. Desjardins highlighted the positive effects of the federal government’s fiscal supports, investment initiatives, and defense spending on targeted growth.
Deloitte’s latest economic forecast predicts a 1.6 percent GDP growth for Canada in 2027, down from the previously anticipated two percent. The firm also raised its 2026 GDP growth estimate to 0.9 percent, showing a slight improvement from the earlier projection of 0.7 percent.
The uncertainties facing Canadian companies, such as higher costs, trade tensions with the U.S., and potential interest rate hikes, are creating a volatile business environment, leading to a slower growth trajectory for the economy.
In recent developments, the Canada-U.S. trade conflict escalated with the U.S. imposing bans on certain Canadian products, including alcohol, motorcycles, molasses, and whey. President Donald Trump expressed confidence in the U.S.’s position and hinted at a potential deal with Canada. Trump’s tariff policies were underscored by plans for a new $15-billion steel plant in Iowa, coinciding with layoffs at a steel mill in Hamilton, Ont., owned by a U.S. company.
The ongoing economic uncertainties are impacting consumer confidence and spending behavior in Canada. The economic climate is expected to lead to increased savings and cautious spending, suggesting a slower pace of growth.
Statistics Canada reported that GDP growth in July remained flat, following three consecutive months of expansion. The agency highlighted a mixed performance across different industry sectors, with the mining and retail sectors expected to offset declines in oil and gas extraction.
Economists are closely monitoring the impact of the latest tariffs on the economy, with a focus on upcoming economic data releases, including the September jobs report and October inflation data. The Bank of Canada is expected to maintain interest rates through the end of 2026, with potential rate hikes in 2027 amid evolving economic conditions.