Deloitte Canada has revised its growth projection for Canada’s economy in 2027, reducing it by 20 percent due to challenging circumstances faced by consumers and businesses. This adjustment coincides with a recent American ban on specific Canadian imports, intensifying the ongoing trade tensions between the two countries.
The impact of the Canada-U.S. trade war escalation is expected to lead to a significant economic slowdown in the final quarter of this year and the beginning of 2027, according to Deloitte’s chief economist, Dawn Desjardins. Desjardins highlighted that the imposition of U.S. tariffs and Canada’s retaliatory measures will affect different sectors of the Canadian economy unequally, causing hardship in some areas while fostering growth in others. She also noted that the federal government’s financial support, investment strategies, and defense spending are positive indicators for targeted economic development.
Deloitte’s latest economic forecast predicts a 1.6 percent GDP growth for Canada in 2027, down from the previously projected two percent growth. The firm’s current outlook for 2026 anticipates a 0.9 percent economic expansion, slightly improved from the initial estimate of 0.7 percent in June.
Desjardins emphasized the prevailing economic uncertainty, with factors such as increased costs, trade friction with the U.S., and potential interest rate hikes contributing to a volatile business environment. As a result, she expects the Canadian economy to experience a slower growth trajectory.
The Canada-U.S. trade conflict has escalated beyond tariffs to include bans on certain products, such as alcohol, motorcycles, molasses, and whey items. President Donald Trump’s administration has enforced these bans, asserting that the U.S. will emerge victorious in the trade dispute. Trump’s recent announcement of a substantial investment in a U.S. steel plant in Iowa was seen as a testament to the effectiveness of his tariff strategy, coinciding with layoffs at a steel mill in Hamilton, Ontario.
Amidst the economic uncertainty, Statistics Canada reported stagnant GDP growth in July after three consecutive months of expansion. The agency highlighted that while the goods-producing industries remained stable, the services-producing sector saw fluctuations. The flash estimate for August suggests a 0.2 percent growth, with the mining and retail sectors offsetting declines in oil and gas extraction.
Economists like Andrew Grantham from CIBC anticipate the impact of the latest tariffs on the economy, emphasizing the importance of upcoming economic indicators such as the September jobs report and October inflation data for the Bank of Canada’s monetary policy decisions. The central bank is expected to maintain interest rates throughout 2026 before potential increases in 2027, with some analysts suggesting earlier rate hikes based on recent communications from the Bank of Canada.
