Tariffs, trade uncertainty still dragging economic growth 

On the heels of new year fireworks, the bell has rung on the next period of Canada-U.S. trade relations. Forecasters with the country’s largest financial advisory firms have flagged the status quo of trade uncertainty, alongside the importance of the first half of 2026 in addressing it.

On several occasions, including on CIBC’s Eyes on the Economy podcast, deputy chief economist Benjamin Tal has referred to the current state of affairs as the Trump “fog”. It’s a perfect image for Atlantic Canadian businesses in terms of understanding where things stand under the governments led by Canadian Prime Minister Mark Carney and U.S. President Donald Trump. Yet, Tal and others have also spoken about hopefully seeing the fog lift in the second half of this calendar year.

Deloitte Canada chief economist Dawn Desjardins described to Atlantic Business Magazine back in mid-2025 how the trade relationship stood as “the biggest wildcard” in economic forecasting for the region. “Certainly, it’s still the dominant factor,” she said last week, following the release of Deloitte’s latest outlook.

Forecasters are unsure what will come but, across the board, they noted cross-border discussions are expected to heat up through the first half of this year. A milestone mandatory review by governments of the Canada-U.S.-Mexico Agreement (CUSMA) is officially set to begin in July.

Public discussion on the current uncertainty in trade has, to date, been focused on sector-specific tariffs introduced since the agreement was established in Trump’s first term as president, including on trade in steel, aluminum and motor vehicle components. One of the exceptions in that national picture is in forestry and timber products, particularly out of New Brunswick.

Deloitte’s forecast highlighted the 10 per cent tariff for softwood lumber products entering the U.S. It was added last fall to a pre-existing 35-45 per cent tariff (depending on the product). The total tariff is highlighted in the forecast, predicting slowed economic activity in New Brunswick into 2026.

That said, existing cross-border tariffs are not the only concern. Particularly important to many small and medium-sized enterprises in Atlantic Canada is that most Canadian exports to the U.S. currently remain exempt from tariffs, dubbed CUSMA compliant.

“I guess the one thing to point out in this forecast is we do still believe we’re going to have access to the U.S. market even after the review. It might not be exactly the same agreement, but in the main we think we’re still going to have access to the U.S.,”

—Dawn Desjardins, Deloitte Canada chief economist

“I guess the one thing to point out in this forecast is we do still believe we’re going to have access to the U.S. market even after the review. It might not be exactly the same agreement, but in the main we think we’re still going to have access to the U.S.,” Desjardins said.

Deloitte is forecasting New Brunswick will still see economic growth below the national average this year, at an estimated 1.4 per cent. Tariffs and trade uncertainty are not the only reasons for the slowdown, but both are also cited for tempered outlooks for Nova Scotia (1.6 per cent growth in GDP) and Prince Edward Island (1.5 per cent). The company has forecast two per cent growth in GDP in Newfoundland and Labrador in 2026, mentioning ramp up of oil production from the West White Rose offshore project.

Over at BDC, the forecast is that trade uncertainty will continue to hurt Canadian exports. “These trade tensions are also likely to dampen businesses’ enthusiasm for investment,” states their 2026 outlook.

The forecast states—even with expected strong consumer spending—businesses should expect 2026 to involve continued calls for, and adaptation of, shifting supply chains. That will be on top of any cost pressures for businesses importing from the U.S., already dealing the strong U.S. dollar and rising wages.

BDC vice-president and chief economist Pierre Cléroux stated the current thinking is that more businesses will opt to make investments in the face of these cost pressures with long-term productivity in mind.

The latest quarterly outlook from RBC suggests “cautious optimism” on the overall economic outlook. Specific to trade, the view is tied to political conditions inside of the U.S. “While we don’t expect U.S. tariff hikes in 2025 to reverse, we also don’t expect more significant increases. The U.S. administration’s approach to trade policy remains unpredictable, but political appetite for additional tariffs appears to be waning ahead of the November 2026 U.S. midterm elections,” states the outlook, produced by a team led by chief economist and senior vice-president Frances Donald.

The RBC team makes a point to note CUSMA terms for free trade are important for U.S. importers, not just Canadian companies.

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