The early days of the federal election campaign have felt a bit anti-climactic. After weeks of high political tension, the Conservatives and Liberals have moved carefully thus far with matching tax cuts and other pocketbook promises. Donald Trump and the Canada-U.S. relationship have loomed less than one might have anticipated.
Wednesday’s announcement of impending tariffs on Canada’s auto sector, however, was a reminder that there’s no escaping them altogether. Next week’s anticipated round of additional tariffs on what Trump has bizarrely referred to as “Liberation Day” will only reinforce this rather bleak realization.
Although the specifics are still unclear, we should be braced for virtually anything, including generalized tariffs on Canadian exports or sectoral ones like on the auto sector, as well as so-called “retaliatory tariffs” in response to Canadian policies ranging from supply management to the digital services tax to the GST. Depending on the final details, the imposition of new tariffs has the potential to upend the election campaign.
It may be the case, therefore, that the major parties are holding back their more radical policy proposals until they have a better understanding of the political economy landscape. If so, next week’s tariff announcement could be a defining moment for the campaign.
The different scenarios could have significant economic and political implications. Even if the tariff announcement is further delayed, the economic costs could still be notable. The effects of economic uncertainty alone could push Canada’s economy into a recession.
If the Trump administration proceeds with the sectoral tariffs on the Canadian auto industry, the effects could compound through the integrated supply chains. The potential for short-run labour disruption and long-run capital flight could be high. Ontario’s economy in particular would be vulnerable. The Hub’s economics editor-at-large Theo Argitis has even raised the prospect that certain sectors in the province could eventually require a government bailout.
And then, of course, there’s the unlikely yet still possible scenario that we see across-the-board tariffs of 25 percent. RBC Economics estimates that such a tariff hit would cause unemployment to rise above 8 percent, cut GDP growth in half this year, and add 2.5 percent to consumer price increases.
These different outcomes—or some variations thereof—will undoubtedly influence the trajectory of the election campaign. One gets the sense that, at minimum, they’ll force the parties to shift their focus from pocketbook issues to the macroeconomy. The result might be a higher policy ambition than we’ve seen so far.
A recent DeepDive essay by RBC’s John Stackhouse suggests that Canada’s resources sector—including energy, agriculture, and critical minerals—is a good place to start. The key to better leveraging these resources is critical infrastructure such as pipelines, railways, and mineral processing facilities. Public policy plays a huge role in enabling infrastructure investment from the regulatory environment to trade facilitation to financial incentives. Pierre Poilievre and Mark Carney have both talked about “building things.” Resource-related infrastructure ought to be a priority.
There are opportunities for the parties to put forward policy proposals along these lines. One idea would be for the government to use unconventional financing models to support private investment into mineral processing facilities in different parts of the country. It would make us less reliant on China for critical mineral refining and create an advantage in negotiations with the United States. We may even be able to argue that such public expenditures should be attributed to our 2-percent NATO target on the grounds that an affordable and reliable supply of critical minerals is Canada’s best contribution to continental defence and security.
Another would be to build on federal experience and different provincial models to support Indigenous communities to obtain equity stakes in major infrastructure projects. There isn’t a major resource project in the country underway or contemplated that doesn’t impinge on Indigenous territory. Facilitating equity ownership by affected communities should therefore be viewed as a win-win. It can help the communities partner in the upside of major resource projects as well as help to meet any reasonable threshold of the duty of consult. If a community has acquired an equity stake in a project, then ostensibly it’s been adequately consulted.
As for the regulatory environment, we should be pushing policy reform up to its constitutional limit. The parties should commit to clarifying the roles of Ottawa and the provinces on major resource projects with the ultimate goal of “one project, one assessment, one decision.” They should also aim to match peer jurisdictions on legislated timelines for reviews themselves in order to provide greater certainty for businesses and investors.
The list of possible reforms invariably goes on. The key point is that as the campaign shifts next week from pocketbooks to tariffs, there will be a need to adjust the policy conversation accordingly. Canadians will be looking to the different parties for ideas to boost investment and employment in the face of Trump’s economic shock.
Pierre Poilievre and Mark Carney should view Liberation Day as a chance to liberate themselves from the smaller, more transactional policies that have dominated the campaign so far, to bigger, bolder ones that can ultimately strengthen Canada’s economy.
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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…
