Deloitte slices 2027 Canada GDP forecast 20% as tariff war bites

Deloitte Canada has cut its 2027 real GDP growth forecast by about 20 per cent — from 2.0 per cent in June to 1.6 per cent — arguing that escalating Canada–U.S. tariffs will slow the economy sharply into year-end and early next year.

The firm’s fall outlook, summarised by CBC News, Global News and the Financial Post, still lifts the 2026 call by 0.2 points to 0.9 per cent on stronger-than-expected first-half momentum, including a 3.3 per cent second-quarter surge. Chief economist Dawn Desjardins said that burst may be the last “highlight” for a while as firms and households adjust to higher frictions with Canada’s largest trading partner. Deloitte’s baseline builds in the Aug. 22 U.S. Section 338 50 per cent tariffs and Canada’s Sept. 8 countertariffs, but treats later U.S. expansions and the Sept. 29 ban on selected Canadian alcohol, motorcycles, molasses and whey as downside risks not fully scored.

Trade is labelled the dominant risk. Exports are still expected to rise 2.6 per cent in 2026 overall, yet Deloitte sees them falling 0.9 per cent in the third quarter and 5 per cent in the fourth before crawling just 0.3 per cent higher in 2027 as supply chains reorient and U.S. buyers balk at tariffed prices. Business non-residential investment remains the “most prominent weak spot,” though the firm expects investment to firm to 1.6 per cent growth in 2026 and 3.5 per cent in 2027 if Ottawa’s competitiveness measures — interprovincial barrier cuts, faster permitting and the Productivity Mega Deduction — restore confidence. High energy prices add an inflation pass-through risk that could yet push the Bank of Canada off its assumed hold at 2.25 per cent for the rest of 2026.

Statistics Canada’s July GDP print was essentially flat after three expansion months, with a preliminary 0.2 per cent August rebound — old news for markets already pricing tariff escalation, CIBC’s Andrew Grantham noted. Attention now turns to the Oct. 9 jobs report, Oct. 19 CPI and the Oct. 28 Bank of Canada decision. Deloitte’s full “Weathering change” outlook frames policy support and defence spending as partial offsets, not a cure for trade uncertainty.

Sources: CBC News; Global News; Financial Post; Deloitte Canada Economic Outlook.