Canadian Prime Minister Mark Carney has unveiled his inaugural federal budget, outlining an ambitious strategy to reshape Canada’s economy and address the challenges posed by US tariffs.
Dubbed an “investment budget” by the government, the fiscal blueprint projects a deficit of C$78 billion ($55.3 billion; £42.47 billion), marking the second-largest in the nation’s history.
The outlined expenditures are counterbalanced by plans to attract C$1 trillion in investment to Canada over the next five years. The federal government argues that more restrained spending would necessitate the elimination of “vital social programs” and funding essential for Canada’s future.
The budget does stipulate certain cuts, including a reduction of the federal workforce by approximately 10% in the coming years.
Canada’s Finance Minister, François-Philippe Champagne, presented the budget to the House of Commons on Tuesday afternoon.
In his address, Champagne cautioned that Canada faces “a time of profound change,” requiring “bold and swift action” to ensure the nation’s continued prosperity.
Throughout the budget, there are references to uncertainty and the need for protectionist measures due to US tariffs on Canadian goods. President Donald Trump has imposed a broad 35% levy on Canadian goods not covered by existing free trade agreements, and has also targeted specific sectors such as steel, aluminum, and automobiles with tariffs.
These levies, implemented earlier this year, have already resulted in job losses within the affected Canadian sectors. Business leaders have also expressed concerns about a potential chilling effect on investment in Canada due to trade uncertainty.
To counteract these effects, the budget proposes spending C$280 billion over the next five years “to strengthen Canada’s productivity, competitiveness, and resilience.”
These initiatives include modernizing ports and other trade infrastructure with the goal of doubling Canadian exports to non-US markets over the next decade, as well as providing direct financial support to firms impacted by tariffs.
The fiscal update also articulates a plan to enhance Canada’s competitiveness, with the aim of making the country a more attractive destination for business than the United States.
Rebekah Young, Head of Inclusion and Resilience Economics at Scotiabank, stated that the budget outlines a strategy to reduce timelines and streamline regulatory hurdles, with the expectation that this will bolster private investment in Canada over time.
However, she cautioned that certain aspects of the budget might face resistance from Canadians grappling with the immediate challenges of the rising cost of living.
“They’re going to open this budget and not see any new (supports),” she said.
While the budget fulfills its commitment to generational spending, Ms. Young noted that whether it will be as “transformational” as Prime Minister Carney anticipates remains to be seen.
“We want to unlock a trillion dollars based on this investment here. A lot has to happen to get to that trillion,” she said.
Regarding defense, the budget commits nearly C$82 billion over five years—the largest allocation in decades—aligning Canada with its NATO commitment to spend 2% of its gross domestic product (GDP) on its military by this year.
The Carney government is also making a significant investment in artificial intelligence (AI), proposing nearly C$1 billion to promote the integration and utilization of this rapidly growing technology, including within government operations.
Prime Minister Carney had previously warned Canadians of impending “sacrifices” in anticipation of the budget. Among these is a reduction in the size of the federal government, projected to result in 40,000 job losses by 2029. International aid is also slated for reduction to pre-pandemic levels.
Immigration targets have been modestly lowered over the next three years to “stabilize” new admissions to the country, including a significant reduction in student visas.
The budget requires approval from the Canadian Parliament before it can be implemented. Carney’s Liberal government holds a minority of seats, needing support from other parties to enact its fiscal plan.
Failure to secure passage of the budget could potentially trigger a federal election.
Conservative opposition Members of Parliament (MPs) have criticized the budget for increasing Canada’s deficit while providing insufficient measures to address affordability concerns for Canadians.
Yves-Francois Blanchet, the leader of the Bloc Québécois, a separatist party, has stated that his caucus does not foresee a scenario in which they could support the budget.
Meanwhile, members of the New Democratic Party (NDP), a left-leaning party, have indicated they will take time to thoroughly review the budget, but have expressed concerns regarding the proposed cuts to the public sector.
Despite the projected increase in the deficit, the Carney’s fiscal plan asserts that Canada still maintains the lowest deficit-to-GDP ratio among G7 nations, second only to Japan.