Tariff and other assumptions

Oil prices and refinery margins remain elevated and are assumed to decline gradually. Trade between Canada and the United States remains mostly tariff‑free. But the breakdown in negotiations has led to new tariffs and increased uncertainty.

Tariff assumptions

The projection is based on tariffs and related trade measures in place or officially announced as at October 22, 2026. This includes new measures introduced after trade negotiations between Canada and the United States broke down in late August (Table 1).1

* These tariff rates include the impact of Canadian tariff remissions.

Most exemptions for goods compliant with the Canada‑United States‑Mexico Agreement are assumed to remain in place where applicable. Current US tariffs and Canadian counter-tariffs are held constant over the projection horizon.

Following the breakdown in negotiations, the United States invoked Section 338 of the Tariff Act of 1930 to impose a 50% tariff on a range of Canadian goods regardless of their treatment under the Canada‑United States‑Mexico Agreement. Some of these goods include machinery and equipment, plastics, furniture and wood and paper products.

For some products, the new 50% tariff was added to existing duties. The United States also announced import bans on selected products, including some alcohol and dairy products. However, crude oil and other energy products, potash and critical minerals remain exempt from the new tariffs.

Canada responded with new counter‑tariffs on about $28 billion of US goods. Most were applied to intermediate inputs such as steel and aluminum, with relatively few final consumer goods affected.

The average US tariff rate on imports from Canada is now estimated at 7.5%, up from 5.0% in the July Report. About 80% of Canadian goods exports to the United States remain tariff‑free. The average Canadian tariff rate on imports from the United States has risen from 1.5% in the July Report to 3.9%.

Price assumptions for oil and refined products

• Oil prices are assumed to remain in line with the futures curve as at October 15, 2026. The price of Brent oil is assumed to average about US$100 in the fourth quarter of 2026 and then decline gradually. Brent oil then settles around US$75 by the end of 2028, about US$5 higher than assumed in the July Report. Prices of West Texas Intermediate and Western Canadian Select are assumed to follow a similar path, stabilizing at about US$70 and US$55, respectively, by the end of 2028.
• Refinery margins are expected to remain elevated through the end of 2026 (see In focus: Refinery margins and the persistence of energy inflation). In line with market expectations, gasoline refinery margins gradually ease over 2027.

Other assumptions

The projection is also conditional on several other assumptions.

• The Canadian dollar is assumed to average 71 cents US over the projection horizon, unchanged from the July Report.
• Potential output growth in Canada is projected to ease to just under 1½% in 2026, reflecting a slowdown in population growth and the effects of US trade policy. Growth remains at about 1½% in 2027 and rises to about 1¾% in 2028. This pickup is due to stronger investment, partly in response to new incentives, and greater adoption of artificial intelligence. The drag on trend productivity from US tariffs also diminishes over the projection horizon.
• The nominal neutral interest rate in Canada is assumed to be at the midpoint of its estimated range of 2.25% to 3.25%.
• The impact of trade policy uncertainty on gross domestic product (GDP) is assumed to ease slowly over 2027 and 2028. It removes 0.4% from the level of GDP in 2027 and 0.2% in 2028.
• The projection incorporates information from the latest provincial budgets, the federal Spring Economic Update 2026 and new federal fiscal measures tabled as at October 19, 2026. It includes the expected effects of the Productivity Mega Deduction and activities related to the Major Projects Office.

Endnotes