Freeland's resignation delays fiscal update as Canada faces larger deficit and trump tariff threats
The Department of Finance released its fall economic statement, projecting a $61.9bn deficit for 2023-24, according to BNN Bloomberg.
The fiscal update, delayed by Chrystia Freeland’s resignation as finance minister, came amid uncertainty over potential 25 percent tariffs on Canadian imports threatened by US President-elect Donald Trump.
Freeland announced her resignation less than an hour before reporters entered a scheduled lockup to review the statement. Government House Leader Karina Gould tabled the fiscal update in Freeland’s place.
Freeland cited disagreements with Prime Minister Justin Trudeau on “the best path forward for Canada,” particularly regarding policies like the two-month GST/HST pause and the stalled $250 workers' benefit cheques.
The 270-page fiscal update highlights economic wins such as inflation stabilizing at two percent and Canada leading the G7 in cutting interest rates. It credits these outcomes to “the government’s prudent fiscal management.”
However, the projected deficit of $61.9bn exceeds last year’s fiscal target of $40.1bn by $21.8bn. Freeland’s previous commitment to fiscal anchors—keeping the debt-to-GDP ratio on a downward path and the deficit-to-GDP ratio below one percent—has not been met.
The government maintains an optimistic outlook, stating that “the economy has achieved a soft landing.” It attributes economic challenges to global factors, including the COVID-19 pandemic and Russia’s invasion of Ukraine.
The update outlines “four key pillars” for Canada’s economic future: generational investments like dental care, enhancing Canada’s AI leadership, mitigating geopolitical risks, and supporting the industrial transition with investments in critical minerals.
Fred O’Riordan, EY Canada’s tax policy leader, expressed scepticism about the update’s projections. He called them “overly optimistic” given Trump’s tariff threats and their potential economic impact.
The fall economic statement, however, largely avoids addressing Trump’s specific tariff plans.
It instead emphasizes Canada’s trade policies, including tariffs on Chinese imports and a “reciprocity” approach to federal spending and trade.
The document introduces a $1.3bn border security package, though it lacks specifics on fund allocation. Public Safety Minister Dominic LeBlanc said preparations to strengthen border personnel and equipment have been underway for months.
The statement does not include new defence spending despite warnings from US lawmakers that Canada must accelerate its military investments to meet NATO targets by 2032.
The fiscal update expands corporate tax credits, including changes to the scientific research and experimental development tax credit.
O’Riordan praised the shift toward “measures geared at investment and economic growth” as a “step in the right direction.” He also noted an extension of economic investment tax credits as a positive outcome.
O’Riordan summarized the fiscal update as presenting “a rosier picture than the reality.”
