Canada's PBO Cuts Economic Growth Forecasts Amid U.S. Tariffs and Trade Breakdown
The Parliamentary Budget Office has lowered its real GDP growth projections for this year and 2027 following the collapse of Canada-U.S. trade talks in late August and subsequent tariffs. The office also forecasts widening federal budgetary deficits through 2030-31.
Canada’s Parliamentary Budget Office (PBO) has revised its economic growth outlook downward for this year and 2027, citing new U.S. tariffs and Canadian countermeasures enacted after trade talks between the two countries broke down at the end of August.
The PBO now projects real gross domestic product growth of 0.9 per cent for this year and 1.5 per cent in 2027. These figures represent a decline from the office's June estimates, which forecast growth of 1.1 per cent and 1.6 per cent, respectively.
The revised outlook follows a new round of U.S. tariffs and Canadian counter-tariffs that emerged after bilateral trade negotiations collapsed in late August.
Alongside slower projected economic growth, the PBO anticipates widening federal budgetary deficits. The office projects a deficit of $63.3 billion for the 2026-27 fiscal year, which is expected to peak at $70.2 billion in 2027-28.
Compared to its June outlook, the PBO estimates that deficits will be $3 billion higher per year on average over the period from 2026-27 to 2030-31. According to the office, new spending measures more than offset stronger revenues during that timeframe.