Ontario
and
Quebec
are expected to be hardest hit by trade disruptions this year, with Canada’s two largest provinces ranking last among provinces for growth in 2025, according to an outlook released by
Deloitte
on Wednesday.
Ontario’s economy is expected to grow by 0.4 per cent this year, while Quebec is expected to have the second-worst growth at 0.5 per cent.
“
Tariffs
are expected to be most impactful in Ontario as it is the top exporter of
steel
and finished automobiles,” the report said. “Indeed, Central and parts of Eastern Canada are facing the most subdued economic growth forecast this year, with Ontario particularly hard hit given its exposure to industries with large tariffs in place.”
Dawn Desjardins, chief economist at Deloitte Canada and a contributor to the report, said the decline in
immigration
is also going to have an effect.
“We are going to see much lower inflows in the labour force in these two provinces and that is going to weaken consumption and really keep the economy on a slower trajectory,” she said.
Meanwhile, energy-producing provinces such as Newfoundland and Labrador,
Alberta
and
Saskatchewan
are expected to lead in growth this year.
Like its
economic outlook in April
, Deloitte expects the
Canadian economy
to be in a modest
recession
in the second and third quarters of this year before returning to growth at the end of 2025.
Overall, the Deloitte forecast calls for real gross domestic product (
GDP
) to grow by 1.1 per cent this year and 1.6 per cent in 2026.
Deloitte also expects the labour market to continue to deteriorate throughout the summer and into the fall, with
unemployment
peaking at 7.3 per cent in the third quarter. The unemployment rate hit seven per cent in May.
“Losses have been most pronounced in the manufacturing sector, where tariffs on steel, aluminum, softwood lumber and finished passenger vehicles are already having an impact,” the report said. “We are seeing that weakness spill into other industries, with transportation and warehousing and business services also recently reducing their workforces.”
Business investment is expected to remain negative for most of the year before rebounding at the end of 2025, based on the assumption that there will be more coherence on Canada’s trade relationship with the United States and that there will be plans on how large Canadian infrastructure projects will proceed.
Deloitte highlighted that recent federal legislation to
fast-track projects
in the federal interest and remove internal trade barriers could provide a boost to the outlook.
“Our baseline view is that we get this clarity, and we get indications on how the economy is going to evolve with respect to government spending,” Desjardins said. “That in and of itself will jiggle free some corporate dollars on the sidelines and we’ll see some investment activity pick up.”
Deloitte also expects two more cuts to the
Bank of Canada
‘s policy rate by year-end.
“If the economy performs the way we expect it to, that will put some downward pressure, and that will give the Bank of Canada room to lower the policy rate further,” Desjardins said.
The Canadian and U.S. governments are in talks on a new economic and security deal, with both parties indicating it could be reached by July 21, although Prime Minister
Mark Carney
tempered expectations while in Brussels on Monday by saying that “the right deal is possible, but nothing is assured.”
Still, if a deal is reached next month with the U.S. administration as it relates to tariffs, Desjardins said it could be a positive for the outlook if Canada’s preferential treatment under the
Canada-United States-Mexico Agreement
is maintained.
“If that should come to pass, it would give some upside risk to these numbers,” she said.
• Email: jgowling@postmedia.com
Ontario and Quebec economies to be hardest hit this year by trade war: Deloitte
2025-06-25 10:00:36
