In The Weekly Wrap Sean Speer, our editor-at-large, analyses for Hub subscribers the big stories shaping politics, policy, and the economy in the week that was.
Everything must be on the table to protect Canadian competitiveness
Although the Trump administration has yet to impose its much-anticipated tariffs on Canada, we shouldn’t assume that the president’s threat of “economic warfare” isn’t already underway.
The art of war isn’t just about direct attacks or invasions. It can take different forms, including psychological warfare—or psyops.
The issue of tariffs is a good example. The economic harm to Canada doesn’t depend on the actual imposition of tariffs. Even the threat itself is bound to have damaging effects. It creates heightened uncertainty for businesses and investors that’s likely to have the effect of essentially freezing capital in the short term and causing firms to rethink their binational distribution of production over the medium term.
I recently asked University of Calgary economist and regular Hub contributor Trevor Tombe about the effects of tariffs or the threat of tariffs on Canada’s economy. His response was while the longer-term effects were a bit more challenging to predict, “the more rapid response…[is] going to be business investment falling dramatically in Q1 due to the high level of uncertainty that this creates.”
The key point here is that Donald Trump’s capricious claims and evolving threats can impose real costs in and of themselves. One gets the sense that he and those around him understand this. There may in fact be a method to the madness.
It may also be about more than just paralysing Canadian business investment. According to report, we’re already starting to see firms revisit the distribution of their production between Canada and the United States.
As long as the threat of tariffs looms, one can envision other firms making similar calculations. They understand the new political realities in Washington as well as the cost differentials between the two countries. What makes this risk particularly acute is that the firms that opt to shift production back to the U.S. will want to make as much noise about it as possible—which creates a vicious cycle for Canada where the more firms talk about it, others will feel pressure to match them.
It reinforces that Canada’s position cannot be merely defensive. It’s not sufficient to lobby the Trump administration to forgo its tariffs. The threat of tariffs is damaging enough. Canadian policy must counteract the policy and political incentives tilting in favour of the U.S. This means fundamentally reshaping the cost competitiveness between the two countries.
And the only way to do that is to adopt a radical mindset. The Overton Window needs to be pulled wide open. Maybe Ottawa needs to get rid of corporate taxes. Maybe the provinces need to revamp their permitting regimes for major projects. Maybe we need to build nuclear plants across the country to produce abundant cheap and clean energy.
There are no doubt other (and perhaps better) ideas for policymakers to consider. But the key point is to understand that we’re facing acts of economic warfare and we need to be ready to compete or win in the name of protecting Canadians’ prosperity.
If we don’t, the giant sucking sound of investment, production, and jobs leaving for the U.S. will eventually become overwhelming.
Guests including Mark Zuckerberg, Jeff Bezos, Sundar Pichai and Elon Musk, arrive before the 60th Presidential Inauguration in the Rotunda of the U.S. Capitol in Washington, Monday, Jan. 20, 2025. Julia Demaree Nikhinson/AP Photo.
Bring on the rise of the Tech Right
In the aftermath of Trump’s inauguration, there’s been a lot of talk of the rise of the so-called Tech Right and its growing influence on conservative policy and politics. Let me say: I’m all for the participation of entrepreneurs, founders, and technologists in Conservative politics.
It’s clear that figures like Elon Musk, Joe Lonsdale, and others have brought new energy, ideas, and even a coolness factor (as Henry Olsen put it to me in this week’s episode of Hub Dialogues) that have been additive to Republican politics and Trump’s political coalition.
They also bring unparalleled knowledge and experience with technology that can help to solve a lot of long-standing public policy quandaries. This week, for instance, I posted on X about how I think the use of artificial intelligence can be a game-changer for identifying, sorting, and ultimately solving for policy and regulatory differences across Canada’s provinces. It can make far greater progress in addressing interprovincial trade barriers than more bureaucratic meetings or political summits.
The Tech Right can also make broader contributions to the ongoing problem of state capacity. Think for instance of the massive backlogs in Canada’s immigration system and the potential for technology to assess applications far more expeditiously. There are the entire back-office and customer-service functions in the government that are far behind those of the private sector. The list invariably goes on.
It’s not an exaggeration to say that in a world in which the federal government is dealing with large-scale deficits and a growing number of spending pressures, the Tech Right could play a decisive role in helping to resolve Ottawa’s structural deficit and produce better government outcomes.
But it’s not just about driving government efficiencies. It’s about reconceptualizing the role of the state itself. Here, too, the Tech Right can help. These entrepreneurs and technologists come from the part of the economy that is generally less dependent on government protection and subsidies for its growth. They are, in this sense, the true voices of market capitalism which is a useful counterweight in public policy debates to those industries or firms whose business model depends in large part on their proximity to politics.
There are exceptions of course and Conservatives will have to be able to discern between those tech voices genuinely committed to free markets and others who just want their own spot at the trough in the name of economic nationalism or whatever other cause.
Overall, though, the Tech Right’s greatest contribution to our politics may be its ethos of progress. These are people who are marked by an extraordinary degree of ambition and urgency. They can help to pushback against the complacency and short-termism that often defines our politics. Using the federal government’s interchange program, it could be hugely beneficial to bring their ideas and perspectives into the government itself.
Are there potential risks? Yes of course.
The Tech Right may be best thought of as a new and emerging faction within the broader Conservative coalition. There will be instances where the interests and sensibilities of traditional Conservative voters may conflict with its somewhat eccentric priorities and preferences. Conservatism by its nature has an instinct towards gradualism and even anti-progress. The Tech Right has precisely the opposite worldview.
Trump and Conservative leaders elsewhere will need to balance these coalitional factions with a degree of care. But they ought to see the growing shift of entrepreneurs and technologists to the Right as a positive development that can enrich their political movements and help their countries pull out of decadence and stagnation.
Deputy Prime Minister and Minister of Finance Chrystia Freeland gets a shout-out from Prime Minister Justin Trudeau during a caucus meeting on Parliament Hill in Ottawa, April 17, 2024. Sean Kilpatrick/The Canadian Press.
In the end, Trudeau’s ego was his downfall
One of the most surprising developments this week in the Liberal leadership race was Chrystia Freeland’s disavowal of her own increase to the capital gains tax. As of writing, we haven’t yet heard her outline the rationale for such an extraordinary policy flip-flop.
But as someone who has been involved in several federal budgets and witnessed first-hand the working relationship between the prime minister and finance minister, it struck me as a sign that the relationship between Prime Minister Trudeau and Freeland must have been dysfunctional.
It’s hard to otherwise explain how the former finance minister could now be outright opposed to her own signature budget measure from less than a year ago. Presumably, it means that it was foisted upon her by the prime minister and his office against her wishes.
Constructing a budget involves a degree of give-and-take between the prime minister and the finance minister. There were instances during the Harper era when the budget included or excluded measures that Jim Flaherty either favoured or opposed. But I cannot think of a case during my tenure when there was a gap between Harper and Flaherty on the budget’s overarching focus or key measures. They were in lockstep on the big stuff.
Prime Minister Harper was highly sensitive to maintaining a strong working relationship with his finance minister. He understood (sometimes better than staff) that there’s a give-and-take that’s crucial to protecting a shared vision of the government’s economic and fiscal policy.
The same goes for the relationship between Jean Chretien and Paul Martin. Although there were well-known tensions between the two, no one doubts that they were sympatico on the biggest questions, including balancing the budget in 1995. The apocryphal story that one often hears is that Chretien told cabinet ministers if they didn’t submit credible deficit-reduction measures to Martin, he would cut their budgets even deeper.
It seems rather clear that Trudeau never had a similar understanding about the importance of the relationship with his finance ministers. In his book, Bill Morneau describes a perpetual distance between him and the prime minister—one not marked by acrimony so much as a sense that they weren’t quite on the same page. He famously resigned after Trudeau announced a massive, multi-billion-dollar program without even properly consulting him.
Now we have Freeland essentially saying that she opposed the highest-profile measure in her final budget. This of course follows her resignation after the prime minister attempted to fire her after she tabled a Fall Economic Statement which contained measures that she also strenuously opposed.
It’s a bit funny that Harper is often characterized as a loner and a taskmaster and Trudeau has cultivated a reputation as more collaborative and inclusive. The opposite is clearly true. The only ones who cannot see it at this point are the journalists and pundits who are too committed to their own narrative to see the facts.
Trudeau’s political downfall has many factors. But his personal ego and misplaced self-confidence were ultimately to blame. His poor relationships with his two finance ministers are dispositive proof.
Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well as a think-tank scholar and columnist. He previously served as a senior economic adviser to Prime Minister Stephen Harper....
