Deloitte Cuts Canada's 2027 GDP Forecast to 1.6% Amid Trade Tensions
Deloitte Canada has lowered its 2027 GDP growth projection by 20% to 1.6%, citing the impact of U.S.-Canada trade tariffs. This revision follows Statistics Canada's report of flat economic growth in July, while the Bank of Canada prepares for its October interest rate decision.
Deloitte Canada has reduced its forecast for gross domestic product (GDP) growth in 2027 by 20%, lowering the projection from 2% to 1.6%. The consulting firm cited increasingly tough conditions for consumers and businesses resulting from the ongoing trade war between Canada and the United States as the primary driver for this revision.
The downgrade comes shortly after a new American ban on select Canadian imports took effect on Tuesday. Deloitte expects a sharp economic slowdown in the final quarter of this year and continuing into early 2027. Despite the negative outlook for 2027, the firm currently projects Canada’s economy to grow by 0.9% in 2026, which represents an improvement from its June estimate of 0.7%.
Recent data supports the notion of cooling momentum. Statistics Canada reported that GDP for July was flat compared to the previous month. In July, increases in construction and utilities were offset by declines in other goods-producing sectors. Similarly, gains in several service-producing sectors were counterbalanced by drops in retail and wholesale trade.
Andrew Grantham, a senior economist at CIBC, stated that the flat July figure was expected as the economy cooled from a strong second quarter. Deloitte Chief Economist Dawn Desjardins noted that while some sectors face significant headwinds due to tariffs, others may benefit from federal fiscal supports and defence spending. She highlighted that the impact is uneven across Canadian sectors, creating increased uncertainty regarding costs and trading friction for companies.
Looking ahead, the Bank of Canada is focusing on upcoming jobs and inflation data before its next interest policy rate decision, scheduled for Oct. 28.