The Canadian economy is currently “balancing precariously” and is projected to face a downturn later this year, according to a forecast from Deloitte Canada.
According to Deloitte’s spring economic outlook, “Business confidence is diminishing. Investments are stagnating. While Canada’s economy is on shaky ground, this may be an opportunity to create a more robust, productive, and diversified future.”
The report indicates that the Canadian economy might undergo a “slight downturn” in the second and third quarters of the year.
However, a significant rebound at the end of 2024 is anticipated, keeping the annual growth for that year at a positive 1.2 percent.
The primary factor contributing to Canada’s unfavorable economic outlook is the threat from U.S. President Donald Trump’s tariffs.
“Five years ago, we were discussing unprecedented uncertainty as the COVID-19 pandemic unfolded. While the situation is different this time, Canada faces significant economic uncertainty again due to U.S. tariff policies affecting the economy,” stated Dawn Desjardins, Deloitte Canada’s chief economist.
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If the exemptions outlined in the Canada-U.S.-Mexico free trade agreement (CUSMA) are revoked, Deloitte warns that Canada’s GDP could decline permanently by three percent by 2030.
The report notes, “It is a real possibility that the exemptions under CUSMA may be removed, leading to Canadian products losing their favored access to the crucial U.S. market.”
While Canada’s export sector is expected to suffer the most from tariffs, imports will also be adversely affected due to the highly interconnected Canada-U.S. supply chain.
The report also cautioned about potential job losses in sectors severely impacted by U.S. tariffs, such as automotive and metal manufacturing.
Deloitte predicts that the unemployment rate could exceed seven percent in 2025 but will largely remain steady in 2026.
Decreased U.S. demand for Canadian goods might also lead to lower incomes for Canadians.
Additionally, inflation is expected to stay above the Bank of Canada’s target of two percent, but is projected to return to that target next year.
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