Deloitte Canada forecasts the Canadian economy will grow by 1.5 per cent in 2026, down from 1.7 per cent in 2025. The outlook assumes Canada keeps broadly its current, largely tariff-free access to the United States market, with Alberta and Saskatchewan leading provincial growth at 2.1 per cent.
A slower year, built on a trade assumption
The forecast, released Wednesday, rests first on trade. Chief economist Dawn Desjardins said the outlook effectively assumes a “status quo” in Canada’s access to the U.S. market this year — relatively tariff-free trade, apart from the industries the Trump administration has already targeted under separate measures.
That assumption matters because of how much Canadian trade already moves under the Canada-United States-Mexico Agreement. According to figures from the Bank of Canada cited in the reporting, 95 per cent of Canadian goods exported to the United States are CUSMA-compliant and therefore not subject to American tariffs. For energy exports, the figure is 100 per cent.
Desjardins predicted this year’s CUSMA review, scheduled for July, would not leave Canada in a materially worse position than it holds today. She pointed to support for the agreement among American businesses, including a December letter to U.S. Trade Representative Jamieson Greer signed by a group representing more than 500 business organizations and chambers of commerce.
The risk runs the other way as well. Desjardins called the review pivotal, and warned that changes restricting or removing access to the American market would threaten the forecast. High-level Canada-U.S. talks had effectively collapsed last fall, after an Ontario government advertisement featuring former president Ronald Reagan arguing against tariffs aired on American television.
Weak first half, stronger second
Deloitte expects business investment to stay subdued through the first and second quarters of 2026, then rebound in the second half of the year. Two things are expected to drive that turn: clearer answers on the future of Canada-U.S. trade, and progress on the federal government’s infrastructure plans under its new Major Projects Office, which the firm says should draw in more private-sector spending, particularly in infrastructure and natural resources.
In the near term, the economy is expected to lean on government. Desjardins said federal spending on defence, and assistance for sectors hit by U.S. tariffs, will help support growth while private demand is weak. Even so, she described herself as cautiously optimistic rather than upbeat, and said both consumers and businesses are likely to remain hesitant about increasing their spending while the backdrop stays uncertain. On the jobs front, the firm expects businesses to hire fewer new workers in the first half of the year as demand for goods and services softens.
The drag from tariffs is already visible in the national data. Statistics Canada’s most recent figures at the time showed the economy shrinking 0.3 per cent in October from September, with manufacturing of wood products falling 7.3 per cent in the month under U.S. tariffs on some lumber products — the steepest drop in that sector since April 2020. Algoma Steel’s plan to lay off about 1,000 workers was cited as an example of what that lost demand means in practice.
Alberta and Saskatchewan out front
Provincially, the report puts the resource provinces at the top of the table. Alberta and Saskatchewan are each expected to grow by 2.1 per cent in 2026, ahead of the national rate, on the strength of their resource sectors and construction activity.
British Columbia sits at the other end of the discussion. Provincial officials there say the forestry sector is under severe pressure from tariffs, and the province is looking to new markets, including India, and to greater use of B.C. lumber in domestic construction, while relying on federal help for the sector.
Desjardins said that if the second-half momentum the firm expects does build, it would set the economy up well for 2027, even if 2026 itself is slower than the year before.
That January optimism did not fully survive contact with the year. In its spring outlook, Deloitte lowered its 2026 growth call to 1.2 per cent, pointing to higher energy prices, a soft labour market and the same unresolved trade uncertainty — a reminder that the January forecast was always conditional on the trade assumption at its centre.
