Can Canada Have Nice Things?

To say that 2025 has been a year of tremendous change for Canada would be a gross understatement. The confusion created by the current US administration in many areas of global affairs has exposed the significant vulnerabilities that come with being overly dependent on a single country. Alliances are realigning as a result, and the role of the United States as a trusted leader in guiding the global economic order has been turned completely upside down.

Canada has long prided itself on being a trading nation. But are we truly a country that embraces global trade when most of our wares are sold to a single customer? Or are we instead in a relationship of dependence? Indeed, much more trade flows across the border from north to south than it does from east to west in this country. That has left the Canadian economy exposed and vulnerable to the whims of changing US administrations, both for good and for ill. But the ease with which we were able to trade with our neighbour to the south made doing so irresistible. So much so, in fact, that many regulatory barriers to commerce were allowed to be built within our own country. This made it easier for Canada to trade with the US and Europe than for Ontario to trade with Quebec. And it made it easier to source critical minerals from the Congo than from Kenora or Kitimat.

But the times, they are a-changin’. The existential economic threat posed by the Trump administration has jolted Canadian leadership awake—especially our political leadership. We had a federal election this spring that was won on the Trump ballot question. Since being elected to office, Prime Minister Carney has moved fast. The time between announcing and enacting federal policy has gone from glacial to a gallop. Since April 28, the Government of Canada has introduced legislation to bring down the federal barriers to internal trade, expedite the process of building infrastructure projects deemed to be in the national interest, and significantly ramp up defence spending. At the same time, personal and business income taxes are being reduced, while the federal sales tax on select home sales is being eliminated. And not to be outdone, provincial premiers are actively working to reduce impediments to interprovincial trade while supporting local industries in finding more diverse markets for their products and services.

All of this is being done in the name of accelerating Canada’s economic growth while recognizing that the economy is likely to be less integrated with the US in the future than in the past. However, Canadians wouldn’t be blamed for having some skepticism. Take infrastructure, for example. The 2015 federal election was won on a platform that included massively investing in Canadian infrastructure, but that plan ultimately fell short of its stated ambitions. More recently, the Building Canada Act gives the federal Cabinet the authority to decide which specific projects it deems to be in the national interest and therefore eligible for an accelerated process of approval. However, several news headlines have since reported criticism of the proposed bill, ranging from the unclear criteria for selecting projects to the need to respect the duty to consult with Indigenous people and provincial leaders. If the federal government is looking for advice on how to execute effectively on its infrastructure investment plans, they can find it in our recent report External link. on the topic.

Canada’s commitment to significantly increase and accelerate defence spending to meet its NATO commitments is also a sea change in the promise and pace of policy. Enormous investment in military infrastructure, equipment and R&D is expected, along with a substantial increase in personnel. Our analysis External link., published last week, suggests that the economic benefits could be substantial if the federal government is successful. But there are meaningful challenges ahead.

None of this will come for free. Deficits will be larger and debt will be higher because of these policies. However, the federal government has opted to push the publication of its financial forecast to the fall. Only then will Canadians know the true fiscal cost of these ambitions.