Deloitte Canada has lowered its forecast for Canadian economic growth in 2027 to 1.6 per cent, down 0.4 percentage points from its summer outlook, as the trade war with the United States deepens, the firm said in its fall economic report released Tuesday.
The downgrade amounts to a cut of about one-fifth to the firm’s previous 2.0 per cent call for next year, Global News reported. At the same time, Deloitte nudged its estimate for 2026 up by 0.2 percentage points to 0.9 per cent, reflecting an economy that held up better than expected through the first half of the year, including a 3.3 per cent annualized gain in the second quarter, according to the report as described by Global News and The Hub.
“Canada’s trade outlook has deteriorated following the renewed escalation in trade tensions with the United States,” Dawn Desjardins, Deloitte Canada’s chief economist, said in the report, titled Weathering change: Canadian businesses navigate renewed uncertainty.
The firm expects the damage to show up first in exports. Deloitte projects exports will fall at a 0.9 per cent annualized pace in the third quarter and drop 5 per cent annualized in the fourth quarter, before growing just 0.3 per cent in 2027, The Hub reported. Deloitte said it expects the slowdown to be sharpest in the final quarter of this year and into early 2027.
The revised outlook follows 50 per cent U.S. duties that took effect Aug. 22 and Canada’s reciprocal tariffs, which began Sept. 8, according to Global News. Notably, Global News reported the forecast does not account for the U.S. bans on Canadian alcohol, dairy products and motorcycles that took effect at 12:01 a.m. Eastern on Tuesday, the same day the report was released. That suggests the risks to Deloitte’s numbers lean to the downside.
Households are expected to carry more of the load this year than next. Deloitte forecasts household spending will rise 2.1 per cent in 2026 before slowing to 1.4 per cent in 2027, while residential investment is expected to shrink 2.2 per cent this year and edge up 0.3 per cent in 2027, The Hub reported. Business investment in machinery and equipment is projected to climb 5.2 per cent this year, according to The Hub, and services exports are forecast to grow 2.7 per cent next year.
The provincial picture is uneven. The Hub reported Deloitte expects Alberta to lead with 2.0 per cent growth in 2026, followed by Saskatchewan at 1.8 per cent, with Ontario at 1.0 per cent and Quebec at 0.9 per cent. Ontario, home to much of the country’s steel, auto and manufacturing base, has been hit hard by the tariffs, including Stelco’s newly announced layoffs at its Hamilton operations.
On interest rates, Deloitte expects the Bank of Canada to hold its policy rate at 2.25 per cent for the rest of 2026, but it pencils in four rate hikes during 2027, according to both outlets. The central bank’s next rate decision is scheduled for Oct. 28.
Desjardins framed the outlook as slower but still positive. “It is not necessarily a strong growth story, but it is a story where we are growing,” she said, according to The Hub.
The report lands as Ottawa and Washington remain at an impasse. U.S. President Donald Trump said Monday he expected Canada to return to the negotiating table and that he believed a deal would still be made, while signalling he would not back down on the new measures.
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Via Global News and The Hub.
