Full Breakdown
Deloitte Cuts Canadian Growth Forecast as U.S. Tariffs Intensify
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Core Findings and Revised Projections
Deloitte’s fall economic outlook report projects Canadian GDP to rise 1.6 % next year, a 0.4 % downward revision from its previous estimate. The firm expects overall growth to slow, with 2026 GDP expanding by 0.9 %—an increase of 0.2 percentage points from its summer outlook. Business investment is forecast to rise 6 % in 2026, driven in part by AI data-centre projects in Alberta and Saskatchewan and pending federal major-project approvals. The projections do not incorporate the most recent U.S. tariff adjustments and the import ban on Canadian alcohol, dairy products and motorcycles, which Deloitte flags as “downside risk” to the forecast.
Official Statements & Responses
She notes that persistent tariff threats have left both household and business confidence subdued, slowing job growth and likely curbing consumer spending. Firms are described as operating in a “wait-and-see mode,” postponing capacity expansions while monitoring U.S. market access. The report anticipates the Bank of Canada keeping its policy rate at 2.25 % through 2026, but signals a “gradual hiking cycle in 2027” with up to four hikes as tariff-related inflation pressures mount. Elevated energy prices and tariff pass-through are expected to raise the cost of goods and strain mortgage affordability, contributing to a cooling housing market.
Impact on Households and Business Investment
The combination of higher tariffs and uncertain market access is projected to suppress household spending, especially on big-ticket items such as homes. Rising bond yields could make mortgages more expensive, while a surplus of unsold condo inventory may limit new construction. Manufacturing, which has suffered the most consistent job losses since the trade dispute began, continues to feel the strain, exemplified by steelmaker Stelco’s layoff of 350 workers. In sectors with weaker hiring, consumers are expected to bear the brunt of reduced purchasing power.
What’s Next
Deloitte warns that the unmodeled tariff measures—including the latest Section 338 adjustments—pose a “downside risk” that could further dampen export growth in the coming months. The firm expects the Bank of Canada to initiate a series of interest-rate hikes in 2027, responding to persistent inflation risks tied to high energy prices and ongoing trade barriers.
Verbatim Quotes
- “Canada’s trade outlook has deteriorated following the renewed escalation in trade tensions with the United States,” — Dawn Desjardins, chief economist at Deloitte Canada
- “Amid the persistent threat and implementation of tariffs by Canada’s largest trading partner, household and business confidence remain subdued,” — Dawn Desjardins, chief economist at Deloitte Canada
- “Households will not be immune to the economic ramifications of the new rounds of tariffs with job growth expected to slow. This will work to suppress household spending into next year,” — Dawn Desjardins, chief economist at Deloitte Canada
- “Many firms are stuck in a wait-and-see mode as tariff exposure and uncertainty over future U.S. market access cause some firms to postpone capacity expansions,” — Dawn Desjardins, chief economist at Deloitte Canada
- “Despite an economy under pressure from this new round of tariffs and non-existent population growth, the Bank of Canada’s next move is likely to be a hike,” — Dawn Desjardins, chief economist at Deloitte Canada