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Canada braces for tariff hit as GDP impact reaches 0.3 points by 2027
TD Securities estimates the combined effect of new Section 338 US tariffs and Canada’s retaliation will cut GDP by about 0.3 percentage points by 2027, with fiscal support of CAD 7.5 billion expected to cushion part of the shock.
TD Securities’ Robert Both says new US Section 338 tariffs and Canada’s retaliation are poised to weigh on the Canadian economy, estimating the combined measures will trim about 0.3 percentage points from Canada’s GDP by 2027.
The firm expects the growth hit to be concentrated in late 2026, with policy support of CAD 7.5 billion providing partial cushioning. It also says inflation effects are expected to remain contained.
In its analysis, TD Securities argues that higher Section 338 tariff rates and the lack of USMCA carve outs would push policy-implied tariff rates toward 7.5% from roughly 5.0% in Q2. The note also frames the escalation as material, even though Section 338 is targeted, which should make tariff impacts less broad-based.
On the retaliation side, TD Securities estimates Canada’s measures could raise about CAD tariff revenue equivalent to USD 8.4 billion at 2025 import levels, while substitution effects would likely reduce the total. It adds that steel products alone could account for around 30% of retaliation-related revenue and that consumer prices saw no material pass-through from tariffs imposed over 2025.