Canadian Prime Minister Mark Carney has submitted his first federal budget, laying out an ambitious plan to transform Canada’s economy and address U.S. tariff issues.
The fiscal plan, billed by the government as an “investment budget,” increases Canada’s deficit to C$78 billion ($55.3 billion, £42.47 billion), the second-largest in history.
Expenses This is offset by plans to attract $1 trillion in investments to Canada over the next five years, with the federal government arguing that further limiting spending would eliminate “critical social programs” and funding for Canada’s future.
But the budget outlines cuts, including a roughly 10 percent cut to the size of the federal workforce over the next few years.
Canada’s Finance Minister François-Philippe Champagne presented his budget proposal in the House of Commons late Tuesday afternoon.
In his budget speech, Champagne warned that Canada faces a “period of profound change” and that “bold and rapid action is needed” to ensure the country’s prosperity.
Throughout the budget, there are frequent references to the uncertainty caused by U.S. tariffs on Canada and the need for protectionist measures. President Donald Trump imposed a 35% tariff on Canadian products not covered by existing free trade agreements (FTAs) and imposed tariffs on certain sectors such as steel, aluminum and automobiles.
The levy, enacted earlier this year, has already led to a loss of Canadian jobs in the sector, and business leaders have warned that trade uncertainty will discourage investment in the country.
To respond, the budget proposes spending C$280 billion over the next five years “to strengthen Canada’s productivity, competitiveness and resilience.”
This includes updating ports and other trade infrastructure with the goal of doubling Canadian exports to markets outside the U.S. over the next decade, as well as direct financing to support businesses affected by the tariffs.
The fiscal update also outlines plans to strengthen Canada’s competitiveness with the goal of making Canada a more attractive place to do business than the United States.
Rebekah Young, head of inclusion and resilience economics at Scotiabank, said the budget sets out a plan to shorten deadlines and smoothen regulatory hurdles with the hope that it will spur private investment in Canada for years to come.
But she warned that some of the budget cuts may be difficult for Canadians struggling with the cost of living right now.
“They’re going to release this budget and you’re not going to see any new (support),” she said.
And while the budget delivers on its promise of generational spending, Mr Young said it remains to be seen whether it will be as “transformative” as Carney hopes.
“We want to get to $1 trillion based on this investment. A lot of things have to happen to get to that $1 trillion,” she said.
On defense, the budget pledges nearly C$82 billion over five years – the most funding in decades – bringing Canada in line with NATO’s commitment to spend 2 per cent of gross domestic product (GDP) on the military by this year.
The Carney government is also investing heavily in AI, proposing nearly C$1 billion to promote the integration and use of the fast-growing technology, including in government operations.
Carney warned Canadians ahead of budget of “sacrifices.” Among them is a reduction in the size of the federal government that would result in the loss of 40,000 jobs by 2029. International aid is also set to be reduced to pre-pandemic levels.
Immigration targets have been lowered slightly over the next three years to “stabilize” new admissions to the country, including significant cuts to student visas.
The budget must be passed by Canada’s Parliament before it can be implemented. Carney’s Liberal government is three seats short of a majority. This means that enacting a fiscal plan will require support from other political parties.
If the budget doesn’t pass, there’s a risk of a federal election.
Conservative opposition lawmakers criticized the budget for increasing Canada’s deficit while doing little to help Canadians afford it.
Yves-Francois Blanchet, leader of the separatist Bloc Québécois party, said he did not know how his caucus could support the budget.
Meanwhile, lawmakers from the left-leaning New Democratic Party have criticized the planned public sector cuts, although they have said they will spend time studying them.
While the deficit is expected to grow further, Carney’s fiscal plan argues that Canada still has the lowest deficit-to-GDP ratio among G7 countries, behind only Japan.
