Deloitte has slashed its economic growth projection for Canada in 2027 by 20 per cent, warning that worsening trade tensions with the United States are eroding the momentum the Canadian economy had built earlier this year.
The firm's fall outlook report, titled Weathering Change: Canadian Businesses Navigate Renewed Uncertainty, was released Tuesday and projects GDP growth of 1.6 per cent next year — down 0.4 percentage points from Deloitte's previous estimate.
"Canada's trade outlook has deteriorated following the renewed escalation in trade tensions with the United States," said Dawn Desjardins, chief economist at Deloitte Canada and author of the report. "Canada's economy will face challenges in maintaining its recent upward momentum."
The report was released on the same day a U.S. import ban on Canadian alcohol, dairy products and motorcycles took effect. Deloitte's projections incorporated the first wave of 50 per cent U.S. tariffs imposed under Section 338, which began Aug. 22, and Canada's reciprocal counter-tariffs that took effect Sept. 8. However, the firm acknowledged that the Sept. 15 changes to Section 338 — which added new products while removing others — and the new import ban were not factored into its calculations. Deloitte described those additional measures as "a downside risk to the forecast."
Canada imposed dollar-for-dollar counter-tariffs in response to U.S. duties that have now reached 50 per cent on hundreds of Canadian goods.
Desjardins said subdued confidence among households and businesses is a central concern. "Amid the persistent threat and implementation of tariffs by Canada's largest trading partner, household and business confidence remain subdued," she wrote. "For consumers, concerns about job security and the prospect of higher prices may further dampen spending."
The firm expects the trade pressures it has already measured "to become more pronounced in 2027," suggesting the revised forecast may itself prove optimistic if additional U.S. measures continue to accumulate.