Deloitte Cuts 2027 GDP Forecast to 1.6% Amid Escalating U.S.-Canada Trade Tensions
Deloitte has revised its 2027 economic growth projection for Canada downward by 20 per cent to 1.6 per cent, citing worsening trade tensions with the United States. While the firm raised its 2026 growth estimate to 0.9 per cent, it warned that recent U.S. import bans and tariff changes pose significant downside risks not fully captured in the current forecast.
Deloitte’s fall economic report has significantly lowered its outlook for Canada’s economy in 2027, projecting a gross domestic product (GDP) growth rate of 1.6 per cent. This represents a downward revision of 0.4 percentage points from the firm's previous report, amounting to a 20 per cent reduction in the projected growth rate.
The downgrade is attributed primarily to escalating trade tensions between Canada and the United States. The report accounts for the first wave of 50 per cent U.S. tariffs under Section 338, which began on Aug. 22, as well as Canada’s reciprocal tariffs that started on Sept. 8. However, Deloitte noted that more recent measures were not factored into these projections but represent additional downside risks. These include changes to Section 338 tariffs on Sept. 15 and a new U.S. import ban on Canadian alcohol, dairy products, and motorcycles, which took effect on the same day the report was released.
Despite the gloomier long-term outlook, Deloitte revised its 2026 growth projection upward by 0.2 percentage points to 0.9 per cent. Business investment in 2026 is also expected to increase by 1.6 per cent. Dawn Desjardins, an economist at Deloitte, highlighted that while the near-term picture shows some improvement, the manufacturing sector continues to face consistent job losses due to the trade war. A recent example cited was Stelco laying off 350 workers.
The report indicates that household spending is likely to be suppressed by concerns over job security and higher prices, while businesses are postponing capacity expansions due to uncertainty regarding future access to the U.S. market. Inflation risks are rising, driven by higher oil prices and retaliatory tariffs. Consequently, the housing market is expected to cool off and remain unfavourable into next year.
Regarding monetary policy, the Bank of Canada is expected to hold its benchmark interest rate steady at 2.25 per cent through the rest of 2026. However, Deloitte anticipates that the central bank may hike rates as many as four times in 2027 to combat inflationary pressures stemming from tariffs and energy costs.
In other developments, AI data centre projects in Alberta and Saskatchewan are set to advance despite voter opposition. Meanwhile, major corporations like Meta and Bell continue their operations, though the broader economic environment remains characterized by uncertainty.