The Notebook with Theo Argitis: Did Mark Carney just pull a Joe Clark or Pierre Trudeau?

In this edition of the Notebook, we explore Mark Carney’s surprising decision to delay the federal budget, drawing parallels to the the first fiscal plans of both Joe Clark and Pierre Trudeau. We also unpack the consequences of Canada’s retaliatory tariffs on food prices, and examine a new report that suggests our “elbows up” strategy may not be all it seems.

A budgetless spring

In his first real act as finance minister, Francois-Philippe Champagne announced the government won’t produce a spring budget.

Champagne justified the decision on several grounds: we’ve just come off an election, the throne speech will reveal the government’s priorities, and the budget isn’t needed for that. There’s also volatility in the global economy, and he wants to be prudent. A substantial fiscal statement will be released in the fall, he said, implying something will come between October and Christmas.

The last federal fiscal update was December 16. If the government goes 10 or 11 months without another one, it could mark the longest gap in fiscal communication since Paul Martin introduced semi-annual fiscal updates in 1994.

On average, Canadians have received some type of fiscal update every six months for the past three decades. So yes, this would be an unusually long period of fiscal silence.

“We were all quite surprised,” said Rebekah Young, who leads fiscal analysis at Scotiabank Economics, in an interview on Hub Hits. “We know this government has a lot it wants to do and a lot it wants to do very quickly.”

Champagne cited economic turbulence as a reason for delay—but that argument can be flipped. In uncertain times, the public and investors often need more reassurance, not less.

“You want to provide Canadians and provide markets with a fairly regular update,” said Young. “At a time of heightened uncertainty, you want to give the confidence you’ve stress tested your plan against a range of scenarios.”

In fact, delaying any update could stoke uncertainty, for example, by fueling speculation about what the government may be hiding. It could raise questions about whether the fiscal outlook is worse than projected in the Liberals’ campaign platform.

“I would say that one of the macro uncertainties we have been dealing with, along with the trade war, was the absence of a detailed fiscal plan,” Doug Porter, chief economist at Bank of Montreal, said in an email.

The decision was clearly driven by some type of political calculation. At a minimum, the government could have easily released an update of fiscal projections.

It is true we are just coming out of an election and there’s little time to produce a full budget document before summer. Perhaps the government didn’t want to deliver a slimdowned version–only to follow up with real detail later. Especially if that slimdown version is showing much higher deficits than Canadians are expecting—which it almost certainly will.

The prime minister is still an unknown, is politically inexperienced and may want to establish more authority and credibility as he seeks to increase borrowing well beyond even what Trudeau was proposing to finance an ambitious agenda.

This is about controlling the agenda–and the message. And it’s about being cautious.

And Champagne is right that, post-election, some of the usual functions of a budget—like agenda setting—can be handled by the platform and throne speech. But budgets serve other essential purposes, too.

They provide an update on the government’s books, and let investors know how much debt the government plans to sell in coming months. They define the size of the fiscal envelope, and thus the implied trade-offs within it. And they support transparency and parliamentary oversight of public finances.

Budgets themselves have no legal authority, but the convention of presenting them as early as possible exists because the federal fiscal year begins April 1, and fiscal plans provide a framework around which Parliament can make spending and tax decisions.

That’s why this sort of delay is so rare.

Only nine times since 1867 has a fiscal plan of some sort not been released before Canada Day (or Dominion Day). Those include:

• The 2020 pandemic (though Bill Morneau did release projections in July)
• Years when budgets were released by the same government very late in the previous year (2002, 1981, 1910, 1907).
• Times of extraordinary events (the Second World War in 1945, and the creation of the provinces of Alberta and Saskatchewan in 1905).

There are two better parallels. In 1968, a Liberal leadership change followed by an election disrupted the normal budget process. After winning the June 25 vote, the newly elected Prime Minister Pierre Trudeau released a budget four months later in October—which would be the first of many during his tenure. Still, the time between election and budget was much shorter than what Carney is now proposing, and it came soon after Parliament reopened in September.

The other parallel is Joe Clark’s 1979 Progressive Conservative government. Like Carney, Clark won a spring election and failed to win a majority by only a few seats. He delayed his budget by six months, to December, perhaps overthinking things. And the end result was a defeat in Parliament and a loss of power.

Reform urgency is waning

The other question is, what does the decision to delay a fiscal plan say about how much urgency there is around fundamental change? After all, Carney did tout himself as the crisis prime minister.

But the global geopolitical winds—which can change direction very quickly—are now pointing toward de-escalation of trade tensions. Markets are in risk-on mode. Even some Canadian indicators—consumer confidence, household spending—are showing resilience.

If you haven’t noticed: Canada’s stock benchmark hit a record high this week.

That’s all good news for the country and the government, but politically, it may complicate Carney’s crisis narrative.

A diminishing sense of urgency could make it harder to push through structural reforms–on energy development or internal trade barriers, for example. The political space for change will narrow.

Tariff war hitting consumers

Any easing of trade tensions with the U.S. will also revive the debate around Canada’s retaliatory tariffs—now beginning to hit consumers, and raising tough questions.

Trump is currently in deal-making mode, with talks underway with more than a dozen countries. So far, there’s no signal he’s preparing to escalate a tariff war with Canada, whose burden remains lighter than most.

The longer this trade truce lasts, if I can call it that, the harder it will be to justify the continuation of counter tariffs.

Loblaw CEO Per Bank warned on LinkedIn this week that consumers will “be facing a large wave of tariff-related increases in the weeks ahead.” He said the number of affected products could hit 6,000 in the next two months—a sixfold jump.

Just a reminder: while Trump’s tariffs are the catalyst, rising prices in Canada reflect the federal government’s decision to retaliate. This was a policy choice, not an inevitability. I say that without judgment, just context.

One more point: tariffs are among the most regressive forms of taxation. They hit the poor hardest, and there’s no GST-style rebate to offset the impact. That impact is magnified when you consider that the revenue is being used to fund income tax cuts and a reversal of the capital gains tax hike.

And tariff-driven inflation will make it harder for the Bank of Canada to cut interest rates, which would be another blow to low-income Canadians. None of this should feel comfortable for a progressive government.

Elbows down

One complication in tariff analysis is that it’s unclear how much of the retaliatory regime is actually being enforced, due to exemptions.

Oxford Economics released a surprising report this week estimating that Canadian tariffs currently apply to just about $1.8 billion worth of U.S. goods. Effectively, no tariffs.

That’s certainly not a consensus view yet, and runs counter to some anecdotal evidence from people like the Loblaws CEO. But it does raise a good question of how severe the retaliation really is. How up are our elbows?

The Oxford Economics report, by economists Tony Stillo and Michael Davenport, cites the federal government’s April 15 decision to indefinitely pause all counter-tariffs on autos and suspend tariffs for six months on products used in Canadian manufacturing and on other things. Until then, the federal government had imposed duties on about $60 billion worth of U.S. goods, before exemptions. That number doesn’t even include the auto counter tariffs.

This raises many questions, starting with whether the federal government shares this assessment. Remember: the Liberal platform—released April 19, four days after the exemptions were announced—projected $20 billion in tariff revenue this year. That figure implies all counter tariffs are being fully enforced, including on autos and with no exemptions.

I’ll be looking to see if these Oxford Economics findings are confirmed by other economists. This is one situation where it would have been useful to have some type of budget plan or update.

But without one, allow me to speculate: it may be another reason why the government is reluctant to provide fiscal projections right now. There could be a massive hole in the financing of their platform.