The federal election’s top economic issues

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Canadians will head to the polls on April 28 after Parliament was dissolved on Sunday, triggering a snap election. The vote comes as trade threats and challenges to Canadian sovereignty from United States President Donald Trump have reshaped the political landscape, with the campaign now expected to focus on who is best able to handle Trump and build a more resilient economy. Liberal Party Leader Mark Carney and Conservative Party Leader Pierre Poilievre both made pre-election moves on the economic front last week, with Carney eliminating the Liberals’ proposed capital gains tax changes and Poilievre promising “shovel-ready zones” for major infrastructure projects. If these announcements are any indication, deregulation and policies that aim to foster growth will dominate the campaign trail over the next five weeks. Here’s a look at those and other major economic issues Canadians should expect to hear more about in the coming weeks:

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The trade war

Whoever becomes the next Canadian prime minister will have to contend with Trump and Canadian voters will be looking at who is best suited to handle the unpredictable president. The U.S. administration is set to impose reciprocal tariffs on all countries on April 2, and it isn’t clear if goods covered by the Canada-U.S.-Mexico Agreement (CUSMA) will remain exempted from tariffs beyond that date. The mid-campaign deadline is sure to inject drama into the race — if tariffs are imposed, there could be immediate economic fallout to address, in addition to the longer term need to reduce reliance on the U.S. Trump has also expressed his intention to renegotiate CUSMA with an eye to what he views as major trade irritants, including Canada’s supply management system, the digital services tax and even the Canadian auto industry. The next prime minister will be at the negotiating table and voters will be looking for the candidate that can deliver the best deal for Canada, while also presenting ideas for how the country can best diversify its trade opportunities outside of its largest trading partner. Both Poilievre and Carney have vowed to stand up to Trump.

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Energy and infrastructure projects

The trade tensions with the U.S. are also prompting a renewed interest in getting major energy projects built. Last Wednesday, oilpatch executives signed an open letter asking Ottawa to declare an energy emergency and designate key projects within the national interest, so they can be built faster.  The U.S. remains the primary destination for Canadian crude oil, but more pipelines and energy projects could diversify Canada’s oil export destinations and reduce our dependence on the U.S. There are also calls to make Canada competitive in liquefied natural gas (LNG): currently we have no operational LNG export terminals, but several projects are in the works. In the context of the trade war, Canada will need to lean into its energy sector and its competitiveness on a global scale. Part of that will include getting projects built that diversify Canada’s energy exports. Candidates will not be able to avoid having this discussion and the ways it intersects with the candidate’s climate policies will be closely watched. Carney, in his brief tenure as Prime Minister, announced the government would scrap the consumer carbon tax, but committed to maintaining an emissions cap, a policy the energy producers argue will hamper growth in their sector. Poilievre, meanwhile, has promised to eliminate the industrial carbon tax, repeal Bill C-69 also known as “the no pipelines bill” and create “shovel ready zones” for major resource and energy projects.

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Innovation and economic competitiveness

Canada’s GDP-per-capita, a measure indicative of the standard of living, has been trending downward. In 2024, GDP-per-capita fell by 1.4 per cent after declining by 1.3 per cent in 2023. While the decline has in part been a result of population growth outpacing economic output, the country’s poor productivity numbers combined with low business investment, are signs of an economy that is struggling to remain competitive. A full blown trade war with the U.S. is expected to exacerbate this trend, with the Bank of Canada estimating Canada’s business investment could decline by 12 per cent. In response, Poilievre has promised tax cuts to spur investment and innovation and Carney has promised to boost big infrastructure projects and update transportation links.

The removal of internal trade barriers between the provinces are also likely to feature prominently in the candidates’ platforms. Poilievre has promised to push further on bringing down more barriers, promising to work with provinces to harmonize health and safety regulations, so those in the skilled trades do not have to recertify themselves when they decide to work in another jurisdiction. The Liberal government has removed a number of federal exceptions from the Canadian Free Trade Agreement, and Carney said Friday following a meeting with the premiers that Ottawa would aim to remove as many federal barriers to free trade as possible by Canada Day.

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Affordability and housing

Affordability continues to be a topic of top concern for Canadian voters. Even though inflation has returned near the Bank of Canada’s target in recent months, the cost of living has risen significantly since before the pandemic. There is also renewed concern that a trade war will drive up costs. Carney and Poilievre both launched their campaigns by promising middle-class tax cuts. Carney promised to cut the marginal tax rate on the lowest income bracket by one per cent. The Liberal Party says this tax cut will save two-income families up to $825 a year. Poilievre promised to drop the tax rate on the lowest income tax bracket from 15 per cent to 12.75 per cent, a move the Conservative Party says will save two-income families $1,800 a year.

Another important issue is housing, which will be on top of any affordability promises this election. A long-standing issue for Canadians, but especially in vote-rich regions of the country. While all levels of government have tried to address this problem, the Canada Mortgage and Housing Corporation estimates Canada needs to build an additional 3.8 million homes by 2030, to restore affordability. While a trade war has chilled Canada’s housing market in recent months, Canada’s average house price remains elevated at $668,097, according to the Canadian Real Estate Association. During an announcement last week, Carney promised to cut the GST on new homes valued under $1 million for first-time homebuyers, similar to a promise Poilievre made last October, which would remove the GST for new homes under $1 million.

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Government spending

The size of the federal government and the public service grew significantly under the Trudeau government over the last 10 years. The fall fiscal update put the federal government’s deficit at $61.9 billion for the 2023-2024 fiscal year, with a deficit projection of $48.3 billion in 2024-2025 and $42.2 billion in 2025-2026. The federal government is on track to stick to two of its three fiscal guardrails, with the debt-to-GDP ratio set to be 42.1 per cent for 2023-2024 and decline to 41.9 per cent the following year. Poilievre and Carney have both said they would like to see government operating costs decline, with both promising to shrink the size of the federal workforce. Carney raised some eyebrows when he said he would present a new way of crafting the federal budget, by putting the government’s capital and operational spending into two separate budgets. This method has already faced criticism, with Poilievre accusing Carney of trying to “cook the books.” Poilievre has promised not to make big changes to equalization programs, but says he will “spell out” proposed spending cuts in his platform, with the leader previously committing to eliminating bureaucracy and consultants, and cutting foreign aid. With the trade tensions set to affect businesses and workers across the country and many looking to Ottawa for assistance, any plans to cut spending are certain to be closely scrutinized.

• Email: jgowling@postmedia.com

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