Deloitte Canada has reduced its growth forecast for Canada’s economy in 2027 by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment comes in light of a recent ban on select Canadian imports by the United States, leading to heightened concerns about the impact of the ongoing trade tensions between the two countries.
The trade war escalation between Canada and the U.S. is expected to trigger a significant economic slowdown towards the end of this year and early next year, according to Deloitte’s chief economist, Dawn Desjardins. The imposition of tariffs by both countries will affect different sectors of the Canadian economy unevenly, with some sectors facing challenges while others may experience growth and job creation. Despite the uncertainties, positive signals such as fiscal supports, investment initiatives, and defense spending by the federal government are expected to contribute to targeted growth.
Deloitte’s revised economic outlook projects a 1.6 percent GDP growth for Canada in 2027, down from the previous expectation of 2 percent. The forecast for 2026 shows a slight improvement with the economy expected to grow by 0.9 percent, compared to the earlier estimate of 0.7 percent. Desjardins emphasized the uncertainty faced by Canadian companies, including higher costs, trade frictions, and potential interest rate hikes, creating a challenging and unpredictable business environment leading to a slower growth trajectory.
In response to the recent ban on certain Canadian imports by the U.S., President Donald Trump declared intentions to secure a fair deal, highlighting the economic impact of the trade measures on both countries. The ban includes products such as alcohol, motorcycles, molasses, and whey products, as part of the ongoing trade dispute. Trump’s administration pointed to the establishment of a new steel plant in Iowa as evidence of the effectiveness of the tariffs imposed on Canadian goods, despite reports of layoffs at a steel mill in Hamilton, Ontario.
The current economic uncertainty is affecting consumer confidence and spending habits, leading to a more cautious approach towards expenditures and potential increases in savings among Canadians, resulting in a slower pace of economic growth. Statistics Canada reported that GDP growth in July was stagnant, following three consecutive months of expansion, with fluctuations observed in different sectors of the economy. Analysts are closely monitoring the impact of the escalating trade tensions on future economic indicators, such as job reports and inflation data, to gauge the potential implications on the Bank of Canada’s interest rate decisions. Despite the challenges posed by the trade war, policymakers are aiming for a broad economic recovery, with expectations of gradual interest rate hikes in 2027 based on the evolving economic landscape.