Deloitte Canada has shaved 20 per cent off its growth forecast for Canada’s economy in 2027, citing increasingly tough conditions for consumers and businesses.
The accounting firm’s latest outlook comes as a new American ban on select Canadian imports took effect on Tuesday.
Deloitte sees the fallout of recent escalations in the Canada-U.S. trade war causing a sharp economic slowdown in the final quarter of this year and into early 2027.
Chief economist Dawn Desjardins says the weight of billions of dollars in U.S. tariffs and Canada’s reciprocal measures will not fall evenly across the Canadian economy, hitting some sectors hard, while others prosper. At the same time, the federal government’s fiscal supports, investment initiatives and defence spending are positive signals for targeted growth, she said.
“For some, it’s a little bit like the Earth is moving under their feet — and not in a positive way. While in other sectors, I think we can anticipate growth and job creation,” Desjardins told CBC News in an interview prior to the report’s release on Tuesday.
Deloitte’s latest economic outlook for Canada calls for GDP to grow 1.6 per cent in 2027. In late June, the firm said it expected two per cent GDP growth next year.
Deloitte currently sees Canada’s economy growing by 0.9 per cent in 2026 — a slight improvement from its June estimate of 0.7 per cent.
“It’s so uncertain when we think about all the factors the Canadian companies are facing, whether it’s the prospect of higher costs, the prospect of more friction with our largest trading partner or perhaps even higher interest rates. All these factors are just creating a very uncertain environment,” Desjardins said.
“As a result, we do think that the economy probably is going to be on a slower growth trajectory.”
U.S. ban on some Canadian imports
On Tuesday, the Canada-U.S. trade war escalated from tariffs to outright bans of certain products, as U.S. President Donald Trump’s administration halted American imports of Canadian alcohol, motorcycles, molasses, and whey products. Earlier this month, the White House also added more Canadian goods to the list subject to 50 per cent tariffs.
“We’re going to win everything,” Trump told reporters in the Oval Office on Monday, suggesting it’s Canada that has treated the U.S. unfairly.
“I think what’s going to happen is over the next three or four weeks, they’re going to come to us…. They’re going to come in, and they’re going to say, ‘Sir, we are sorry.’ I think a deal will be made, but it’s going to be a fair deal.”
On Monday, Trump touted new plans for a massive $15-billion U.S. steel plant to be built in Iowa as evidence that his tariff attack on Canada is working. His announcement coincided with news of layoffs at a steel mill in Hamilton, Ont., owned by a U.S. company.
WATCH | These Canadian products are now banned in the U.S. amid the trade war:
These Canadian goods are now officially banned in the U.S.
Washington’s ban on several Canadian goods, including alcohol, molasses, motorcycles and select dairy products kick in as of Sept. 29. The list of items might come across as a head-scratcher to some but one trade lawyer suggests there’s more to this collection than meets the eye.
Desjardins says today’s seemingly unending stretch of economic uncertainty is impacting consumers, as well as businesses.
“We’ve got things that are just making us wobble a little bit in terms of our confidence that we should really be spending our money now,” she said.
“Canadians are going to increase their savings a little bit. They’re going to be more cautious about spending money. And so, to that end, it does suggest a very [much] slower pace of growth.”
Canada’s economic growth flat in July
Also Tuesday, Statistics Canada reported that GDP growth for July was essentially flat from the previous month, which came after three consecutive months of economic expansion.
“The goods-producing industries grouping was essentially unchanged in July, as increases in construction and utilities were offset by declines in the other sectors,” the agency stated.
“The services-producing industries aggregate was essentially flat, as increases across several sectors were offset by declines in retail trade and wholesale trade.”
Statistics Canada’s flash estimate for August calls for GDP to resume growth at 0.2 per cent; the agency sees the mining and retail sectors partially offsetting decreases in oil and gas extraction.
Andrew Grantham, a senior economist at CIBC, says the flat July figure was no surprise, as the economy cooled down from a hot reading in the second quarter. Like Desjardins, he’s now looking ahead to what happens as the latest tariffs start to bite.
“Given the escalation of U.S. trade uncertainty towards the end of August, today’s data will likely be viewed as old news,” he wrote in a research note after the data was released.
For the Bank of Canada, Grantham says the focus now shifts to the September jobs report, set to be released on Oct. 9, and the inflation data for last month, which is due to come out on Oct. 19. Canada’s central bank is due to make its next interest policy rate decision on Oct. 28.
Earlier this month, Bank of Canada Governor Tiff Macklem described Canada-U.S. tariffs as “very steep,” but “applied to a relatively narrow base” within the economy. Policymakers at the bank called for a “broadening recovery” in the economy, as they opted to hold rates in place for a seventh-consecutive meeting.
“Our base case remains for the Bank to hold interest rates through the end of 2026 before gradually raising them in 2027,” RBC economist Abbey Xu wrote on Tuesday. “But recent BoC communications have signalled risks around that base-case are tilted to earlier rather than later hikes.”