Prime Minister Mark Carney is scheduled to present the government’s first Federal Budget on Tuesday, and warned Canadians to adapt to an economy that has been reshaped by US tariffs Donald Trump’s Tariffs.
Carney said the spending plan would find significant cuts and “generational investments” to strengthen the economy and reduce the country’s dependence on US trade.
The plan is also expected to show how Canada will pay for the billions of dollars in defense spending to achieve 5% of GDP on defense by 2035.
Analysts have suggested a federal shortfall of c$70bn ($50bn; £38bn), up from $51bn last year.
The fiscal plan is seen as a major test for Carney, a former central banker for Canada and the UK who has promised to make Canada’s economy among the rich nations.
“We’ve taken big, bold risks in this country. It’s time to change the fences,” he said in a pre-budget speech last month.
Canada, which trades primarily with the US, has a particular exposure to tariff shocks.
Carney said he has a goal for the country to double its non-US exports in the next decade.
Joy Nott, a partner at KPMG Canada who focuses on trade and customs, told the BBC that “Canadian companies need to be supported in moving from one market to another market to one market to another”.
That includes everything from raising money to travel on trade missions outside the market and navigating regulatory approvals when entering new markets.
It will take time and money to overcome “the historical difficulties that we see, which prevent them from doing this”, said MS Nott.
Finance Minister Francois-Philippe Champagne underscored the “made-at-home” message on Monday as he bought new shoes – a political pre-budget tradition for federal finance ministers – at a Quebec business that supplies footwear worldwide as well as to Canada’s armed forces and RCMP officers.
The company is “emblematic of who we are as a country”, he told reporters as he stood in the company’s manufacturing facility.
“We’re moving from confidence to stability, from uncertainty to prosperity, we’re going to do the kind of things that make this country strong.
While he said the budget is focused on “investment”, Carney also promised to balance the Federal Operating Budget – day-to-day spending on government programs – in the next three years.
In the summer, the summer ministers were asked to find ways to cut 15% from program spending in the coming years, such as trade industries, and tariffs with tariff industries.
It’s not yet clear where Carney’s liberal party will find the support they need to pass the spending package. The Liberals, who are three seats short of a majority in the House of Commons, need at least one more party to support the fiscal plan.
Canada faces a potential snap election if the Budget Vote, which is a vote of confidence, fails. Although that’s not an unlikely scenario soon after Canadians head to the Ballot Box in the spring.
“I don’t think the other parties want to run now,” said Elizabeth McCallions, a political science professor at the University of Toronto.
The most likely support will come from the left-wing NDP, which is now in the midst of a leadership race after a disastrous showing in the April election.
Prof McCallion said it is possible that some NDP members will abstain from voting to approve the budget.
He said Carney also faces the risk of “continuing to go back to the measures expected” in the budget.
Trump has imposed a 35% tariff on Canadian imports, although most goods are exempt from levies because they fall under a US-Mexico-Canada-Canada-Canada-Canada-Canada-Canada-Canada-Canada-Canada-Canada-Canada-Canada Free Pre Trade Deal. However, global US tariffs on metals, autos, and wood hit the country’s sectors the hardest.
There are signs that trade uncertainty is weighing on the Canadian economy and unemployment is on the rise.
The Bank of Canada Projects The country’s GDP will grow by 1.2% in 2025, 1.1% in 2026 and 1.6% in 2027.