Deloitte Canada has revised its growth forecast for the Canadian economy in 2027, reducing it by 20 percent due to challenging conditions faced by consumers and businesses. This adjustment comes in light of a recent American ban on specific Canadian imports, leading to escalations in the Canada-U.S. trade war that are expected to cause a significant economic slowdown in the coming months.
According to Deloitte’s chief economist, Dawn Desjardins, the impact of billions of dollars in U.S. tariffs and Canada’s retaliatory measures will be uneven across different sectors of the Canadian economy. While some industries may struggle, others are expected to see growth and job creation. Desjardins highlighted that the federal government’s fiscal support, investment initiatives, and defense spending could provide positive signals for targeted growth.
Deloitte’s latest economic outlook projects a 1.6 percent GDP growth for Canada in 2027, down from the previously anticipated 2 percent growth. The firm also revised its 2026 forecast to a 0.9 percent growth rate, showing a slight improvement from its earlier estimate of 0.7 percent.
Desjardins expressed concerns about the uncertain business environment in Canada, citing factors such as potential cost increases, trade friction with the U.S., and rising interest rates. She believes that these uncertainties will likely lead to a slower growth trajectory for the economy.
The Canada-U.S. trade war intensified as the U.S. imposed bans on certain Canadian products, including alcohol, motorcycles, molasses, and whey products. President Donald Trump stated that the U.S. would emerge victorious in the trade dispute, emphasizing the need for a fair deal between the two countries.
In a related development, Statistics Canada reported that Canada’s GDP growth for July was stagnant compared to the previous month after several months of economic expansion. The agency highlighted mixed performances in different industries, with the mining and retail sectors expected to offset declines in oil and gas extraction.
Economists like Andrew Grantham from CIBC acknowledged the cooling down of the economy in July and anticipate the impact of the latest tariffs on future economic data. The Bank of Canada is closely monitoring key economic indicators, including the upcoming jobs report and inflation data, as it considers the timing of potential interest rate adjustments.
Despite the challenges posed by the trade war and economic uncertainties, experts suggest that the Bank of Canada may maintain interest rates through the end of 2026 before gradually increasing them in 2027, depending on evolving economic conditions.