Canada’s economy is facing a turning point.

In a recent episode of Canada’s Economy, Explained, host Marwa Abdou sat down with Dawn Desjardins, Chief Economist at Deloitte Canada, to unpack what’s next for the Canadian economy in 2025.

Desjardins brought deep experience to the table, having previously held roles at RBC, Bloomberg, and JP Morgan. Now at Deloitte, her team just released their economic outlook report titled Calm Before the Storm.

It’s not all doom and gloom.

Desjardins points to a few stabilizing forces: “The Bank of Canada is lowering interest rates. Inflation is trending lower. Households have savings.” Deloitte’s baseline forecast predicts 2% GDP growth in 2025.

But risk is building quickly. One looming threat is the possibility of 25% U.S. tariffs on Canadian exports. “According to our modeling, those tariffs could cost the average Canadian over $2,000 annually,” Desjardins explains. “If Canada retaliates, we’re looking at up to a 0.8% contraction in GDP.”

Takeaways from the episode

1. Tariffs could cost Canadians thousands and trigger a short recession.
2. Immigration policy changes will ease housing demand but reduce labour supply.
3. Business confidence is fragile, and investment is slowing.

When asked how the economy compares to past shocks, Desjardins draws a distinction: “COVID was a global shutdown. Today’s threat is narrower — but just as disruptive for Canada. Our export sector, especially auto manufacturing, is deeply vulnerable.”

A sharp drop in consumer confidence is already being felt. “People are nervous. They’re wondering if they’ll have a job six months from now. That anxiety alone is causing a pullback in spending,” she says in the episode.

Confidence concerns

“Consumer confidence has come down significantly. And business confidence is following,” Desjardins continues. “We’re seeing delays and cancellations in EV investment projects that were just months ago being celebrated.”

Another area of concern is immigration. With federal policies reducing the number of new arrivals, labour market dynamics are shifting. “We had a major influx post-COVID that helped fill vacant jobs. That’s reversing now,” she explains. “That’s good for housing demand, but tough for growth and productivity.”

Deloitte’s downside model shows GDP could fall by nearly 3 points in a worst-case tariff scenario — enough to push Canada into recession territory.

Still, Desjardins offers cautious optimism. “We’re not expecting a long downturn. If concessions happen — on both sides of the border — Canada could exit 2025 in stronger shape than feared.”

She emphasizes infrastructure, interprovincial trade reform, and productivity gains as areas Canada must tackle. “These are long-standing issues. Maybe now, finally, we act.”

“There’s a lot we can’t control. But there’s a lot we can — and should.”

In closing, Desjardins encourages policymakers and business owners to think long-term, not just quarter-to-quarter. “Be cautious but stay engaged. Opportunities will emerge from the uncertainty.”