Canada’s Economic Growth Forecast Cut Amid U.S. Tariffs, Budget Deficit Expected to Rise

Canada’s Parliamentary Budget Officer (PBO) has lowered its economic growth forecasts for 2026 and 2027, citing the impact of tariffs imposed by U.S. President Donald Trump and Canada’s retaliatory measures.

According to the federal budget watchdog’s latest report, Canada’s real GDP is expected to grow by 0.9 per cent in 2026 and 1.5 per cent in 2027. The PBO had previously forecast growth of 1.1 per cent for 2026 and 1.6 per cent for 2027 in June.

The report also projects an increase in Canada’s budget deficit following the breakdown of trade negotiations between Canada and the United States in late August and the subsequent tariffs imposed by both countries.

The deficit is expected to reach $63.3 billion in the 2026–27 fiscal year and could climb to a peak of $70.2 billion in 2027–28.

According to the report, increased government spending is also offsetting the impact of higher revenues.