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"It does seem that now is a bit of a moment," says chief economist Dawn Desjardins

BY  John MacFarlane · Senior Reporter

The “extremely uncertain economic operating environment” defined by U.S. President Donald Trump’s trade policies will have broad fallout for Canadians, but it has also created momentum for positive change, the latest economic outlook from consulting firm Deloitte says.

“It's actually a way that we see forward now, and because we've had this prod from all of the very aggressive language coming towards us, it does seem that now is a bit of a moment,” Deloitte chief economist Dawn Desjardins told Yahoo Finance Canada in an interview.

“Some things change on the margin, but it does feel a bit different, I have to say, compared to other times when people were talking up policy changes that may or may not occur.”

The Deloitte report, published Wednesday morning, projects significant impacts on labour, consumer spending, business investment, imports and exports, and monetary and fiscal policy as a result of the trade war. At the same time, it notes that Canada has thus far seen more favourable tariffs than most other countries.

“In an unexpected way, we might have a little bit of an advantage,” Desjardins said. “Because you didn't feel that, certainly, at the beginning of the year. It did not feel like it was going to be Canada” that suffered less.

Deloitte currently projects a "modest downturn" in the second and third quarters of this year. It expects GDP growth of 1.2 per cent in 2025, down from around two per cent in its previous, pre-tariff outlook — but the report points out that deep uncertainty about nearly everything in the trade war makes a single projection less meaningful. For example, an elimination of the current tariff exemption for goods covered by the Canada–U.S.–Mexico Agreement would mean “Canada’s real GDP would be permanently lower by around three per cent by 2030,” the outlook says.

“With such a wide range of potential outcomes and a lack of clarity on the path forward, a natural response is to develop guidelines to evaluate the implications of tariffs as the situation evolves,” Desjardins wrote in a foreword to the outlook. The key tariff factors to watch are their “size, product coverage, country coverage and retaliatory measures,” she adds.

For now, Deloitte is projecting meaningful tariff impacts across the economy. Low business confidence should slow investment and job growth, and drive the unemployment rate above seven per cent, the outlook says — with the rate projected to reach 7.5 per cent in the third quarter of this year. Consumers will likely spend less, the outlook adds, though they may spend more on Canadian goods. Housing starts and renovations should slow, and home sales should 

. As for inflation, Deloitte expects the rate to approach three per cent despite slowing growth, “and slowly decelerate back to two per cent towards the end of next year.” 

The outlook projects the Bank of Canada’s overnight rate dropping to two per cent in the third quarter of 2025. 'Rare opportunity for upside' An unintended and unexpected consequence of the trade war is that it may end up as “the catalyst for much needed change,” Deloitte’s outlook says. 

The report outlines several factors that combine to create a “rare opportunity for upside,” highlighting a “rallying” of Canadians and a shift in political will. The Canadian public’s unprecedented interest in interprovincial trade barriers and productivity is evidence of a shift, Desjardins says. “People are talking about things and saying, ‘OK, that's inhibiting us as a country. We thought we had a reliable partner, we don't. 

So shouldn't we be looking a little bit more east–west?’” she said. "It will take a lot of will, but I think the tone has changed so that Canadians and businesses are talking about it now.” Desjardins describes interprovincial free trade as a logical first step and “an important signal that we're now in a different headspace across this country.” 

The outlook says Canadian businesses and governments must make investments to boost productivity, and also focus on diversifying markets away from the U.S., describing such efforts as “a must to thrive in the new world order.” Simplifying permits, regulations and taxation systems will also help encourage entrepreneurs and foster growth, the report says.

 Deloitte’s suggestions amount to “a beautiful list,” but remain ambitious even as public momentum builds, Desjardins acknowledges. “I'm not saying that they're all going to happen. But even if we can get some of it to happen, it is going to make us more resilient.” John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.