Canadian Prime Minister Mark Carney unveiled his first federal budget, outlining an ambitious plan to transform Canada's economy and address U.S. tariffs.
The fiscal plan, billed by the government as an “investment budget”, increases Canada's deficit to C$78 billion (US$55.3 billion; £42.47 billion), the second largest in history.
Expenses offset by plans to attract C$1 trillion in investment to Canada over the next five years, with the federal government arguing that more limited spending would eliminate “vital social programs” and funding for Canada's future.
However, the budget calls for cuts, including cutting the federal workforce by about 10% in the coming years.
The budget was introduced by Canadian Finance Minister Francois-Philippe Champagne in the House of Commons late Tuesday.
In his budget speech, Champagne warned that Canada is in “a time of profound change” and that “bold and swift action is needed” to ensure the country's prosperity.
Throughout the budget, there are references to uncertainty and the need for protectionist measures as a result of US tariffs on Canada. President Donald Trump has imposed a broad 35% tax on Canadian goods not covered by the existing free trade agreement, and has also imposed tariffs on certain industries such as steel, aluminum and cars.
The levies, passed earlier this year, have already led to job losses in those sectors in Canada, and business leaders have warned of a cooling of investment in Canada due to trade uncertainty.
To counter this, the budget proposes spending C$280 billion over the next five years “to improve Canada's productivity, competitiveness and resilience.”
These include updating ports and other trade infrastructure to double Canadian exports to markets outside the U.S. over the next decade, as well as direct funding to support companies hit by tariffs.
The budget update also lays out a plan to improve 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 sustainability economics at Scotiabank, said the budget lays out a plan to shorten timelines and smooth out regulatory hurdles in hopes it will encourage private investment in Canada over the years.
But she warned that part of the budget could be a challenge for Canadians who are immediately faced with the cost of living issue.
“They will open this budget and not see any new (support),” she said.
And while the budget delivers on its promise of generational spending, Ms. Young said it remains to be seen whether it will be as “transformational” as Carney hopes.
“We want to unlock a trillion dollars based on these investments. A lot has to happen to get to that trillion,” she said.
On defense, the budget provides nearly C$82 billion over five years – the largest funding in decades – putting Canada in line with its NATO commitment to spend 2% of its gross domestic product (GDP) on its military by this year.
Carney's government is also betting big on artificial intelligence, offering nearly C$1 billion to encourage the integration and use of fast-evolving technologies, including in government operations.
Carney warned Canadians of upcoming budget “sacrifices.” Among them is a reduction in the size of the federal government, which will lead to the loss of 40,000 jobs by 2029. There are also plans to reduce international aid to pre-pandemic levels.
Immigration targets were lowered slightly over the next three years to “stabilize” the intake of new citizens into the country, including a significant reduction in the number of student visas.
Before the budget can be implemented, it must be passed by the Canadian Parliament. Carney's Liberal government lacks a majority, meaning it will need support from other parties to pass its fiscal plan.
Failure to pass a budget could jeopardize federal elections.
One Conservative MP, Chris d'Entremont, said in a statement released by the Liberals on Tuesday evening that he had resigned from the Conservative caucus and would defect to Carney's party.
In a statement, the lawmaker said the budget “adheres to the priorities I heard most about during my trip.”
This narrows Carney's tiny minority at a critical time.
Opposition Conservative MPs, meanwhile, criticized the budget for increasing Canada's deficit while doing little to address the issue of budget affordability for Canadians.
Yves-François Blanchet, leader of the separatist Bloc Québécois party, said his faction doesn't see how they can support the budget.
Members of the left-leaning New Democratic Party said they would take time to study the issue but criticized planned public sector cuts.
With larger deficits projected, Carney's budget plan states that Canada still has the lowest deficit-to-GDP ratio of the G7 countries, second only to Japan.
