U.S. tariffs and population decline could slow B.C.'s economic growth in 2026
B.C.’s economy is expected to grow by 1.2 per cent in 2026, according to an economic forecast report from Deloitte.
This is down from B.C.’s real GDP growth in 2025, which was 1.7 per cent.
“British Columbia is navigating a softer year, mainly because the forestry sector is still feeling the weight of U.S. tariffs,” said Dawn Desjardins, Deloitte Canada’s chief economist, in a release.
U.S. tariffs have caused B.C. forestry operations to cut production and even to permanently close mills, which “underscore the depth of the downturn and its impact on employment,” reads the report.
Further, B.C.’s population growth is slowing, which Deloitte says “further restrains economic momentum and labour-market conditions.” In 2025, the province’s population declined by 0.7 per cent, due to federal government policy reducing the number of non-permanent residents.
The housing market isn’t expected to improve in 2026, either, with B.C. home sales dropping in every region.
However, Deloitte noted that some major infrastructure projects, like BC Hydro’s North Coast Transmission Line and Teck’s Highland Valley Copper Mine extension, are helping to partially offset the forestry and housing declines.
B.C.’s 2026 budget projects a deficit of $13.3 billion for the 2026/2027 fiscal year — equivalent to 2.9 per cent of GDP. According to a recent report from TD, B.C.’s growing debt levels and spending growth continue to outpace revenue levels, which in turn leaves the province more vulnerable to economic shocks.
Despite Deloitte calling this a “muted” year for B.C, it still has the third largest projected real GDP growth in the country, behind Alberta at 1.7 per cent and Saskatchewan at 1.9 per cent. The province with the worst economic outlook is Quebec, at 0.7 per cent.
What about the rest of the country?
Deloitte is forecasting that Canada’s economy will grow 1.2 per cent in 2025, down from a 1.7 per cent growth in 2025.
Desjardins also said Canada is “working through a softer economic year.”
The sudden increase in energy prices due to the war in the Middle East, uncertainty about the trade agreement with the U.S. and Mexico, and slowing population growth are all “weighing on the economy,” according to the report.
While Deloitte predicts labour market conditions to stabilize through 2025 — with the unemployment rate expected to drop from 6.7 per cent to 6.3 per cent by year-end — they also predict that consumers will remain cautious with spending.
Housing starts are also expected to drop slightly, from 259,000 in 2025 to 243,000 this year.
Deloitte said that its economic forecasts assume that most Canadian goods won’t be slapped with tariffs, and that the CUSMA review “will pass without major alteration.”
Exports have started to recover after a steep decline last year, and Deloitte expects this to continue with targeted tariff relief this year, like the recent removal of Chinese tariffs on Canadian agri-food and seafood products.
It added that the federal government’s “aggressive policy” to sign free trade agreements with other countries “provides some upside for exports.”