Deloitte slashes 2027 economic outlook by 20% as trade tensions worsen

Deloitte has revised its 2027 economic outlook downward by 20%, citing worsening trade tensions between Canada and the U.S. The firm projects Canadian GDP to grow by a total of 1.6% in 2027, a 0.4% decrease from its previous estimate. Dawn Desjardins, chief economist at Deloitte Canada, noted that the deterioration in Canada's trade outlook due to renewed trade tensions with the U.S. has led to a more subdued outlook.

The report factors in the initial wave of 50% U.S. tariffs under Section 338, which began on August 22, and Canada's reciprocal tariffs that started on September 8. However, it does not account for additional tariff measures introduced in September and October, which are expected to pose a downside risk to the forecast. Despite positive signs such as the Canadian economy's growth in the first half of 2026, the report warns that business confidence remains low due to job security concerns and higher prices.

The report also highlights the negative impact of sectors like manufacturing, which have experienced consistent job losses since the trade war began. The Bank of Canada is expected to maintain its benchmark interest rate at 2.25% for the remainder of 2026, but could potentially raise rates four times next year amid ongoing trade uncertainties.