Canada Faces Slower Growth as US Tariffs Add to Economic Costs, KPMG Canada Says

12:28 PM EDT, 08/31/2026 (MT Newswires) -- Canada's economic recovery is expected to lose momentum but remain on track as higher US tariffs weigh on growth, according to KPMG Canada. A permanent increase in the US tariff rate to 7% could lower Canada's gross domestic product by 0.3 to 0.5 percentage points next year, slowing 2027 growth to 1.5% to 1.7% from around 2%, KPMG Canada said in a late Friday note. The latest US tariffs are expected to have a modest impact on the Canadian labor market, reducing employment by 5,000 to 15,000 jobs, it added. Canadian retaliation could further lower GDP by 0.1% to 0.2% while adding 0.2% to 0.3% to inflation over the next year. Overall, US tariffs and Canadian retaliation could reduce GDP by 1.0% to 1.5%, equivalent to an inflation-adjusted output loss of C$30 billion to C$50 billion, while eliminating 25,000 to 40,000 jobs by end-2027, calculated KPMG Canada.