The Notebook by Theo Argitis: Carney’s nation-building reset

In this edition of The Notebook, we look at the major shift in Canada’s infrastructure and regulatory strategy under Prime Minister Mark Carney. We’re also diving into the fresh legal blows to President Donald Trump’s tariffs, as well as the growing risk that the trade war could morph into a capital war. And finally, we’ll check in on some new GDP data out of Statistics Canada.

A new approach to building big things

Carney will meet with premiers on Monday in Saskatoon, where he’s expected to present new legislation aimed at streamlining regulatory approvals for major projects deemed to be in the national interest. The new process would give decision-making authority to a designated minister, presumably with cabinet support behind them, with the goal of completing approvals in under two years. The legislation is expected in early June.

It’s the first concrete step in Carney’s ambition to reset how this country approaches infrastructure and resource development. And it’s a big departure from the Trudeau-era regulatory regime, which had broadened environmental assessments to include a wide range of considerations: social, economic, climate-related, and more.

To borrow an insight from my Hub colleague Sean Speer, Carney wants to shift the regulatory default away from value-laden normative judgments—like whether we should be pursuing fossil fuel development at all—and back toward technical assessments grounded in science and engineering. In other words, from politics to process. At least for the very big national projects.

According to media reports, a government background document describes the shift like this: “Once a project is determined to be in the national interest, federal reviews will shift from ‘whether’ to build these projects to ‘how’ to best advance them.”

It’s a very encouraging development. What’s most striking is the lack of resistance. It’s as if the past decade of environmental activism, virtue-signalling, and regulatory and legislative zeal has simply evaporated. Not just among activists, but within Carney’s own caucus and cabinet, many of whom were once fierce advocates for the Trudeau-era rules the current government is trying to bypass.

Maybe it’s a tacit acknowledgment that the pendulum swung too far. The environmental movement, having overreached, now finds itself on the wrong side of public opinion.

Or, what we may be seeing is less a rethink than a kind of deathbed conversion—a realization that the alternative, represented by Pierre Poilievre’s minimalist approach to climate, would be a lot worse than whatever Carney is trying to do.

Here is another way to frame it. After years of demanding that resource companies earn their “social license” to invest and operate, the argument has flipped. It’s now the climate transition that must earn a social license by showing it won’t come at the cost of our prosperity.

Carney the enabler

Streamlining approvals is only one piece of a three-part strategy to break through Canada’s project gridlock. The other two pieces: finance and commercialization.

On the finance side, the objective is to scale up private investment significantly. That’s a notable departure from Trudeau’s infrastructure strategy, which was generous but leaned more on public dollars, albeit with cost-sharing from provinces.

And if the objective is to leverage private capital, this gives us a clue about the kinds of projects Carney will be eyeing. The focus will be on large scale, revenue-generating projects that are “bankable” enough to attract capital from large institutional investors such as the Canada Pension Plan or Carney’s former employer, Brookfield Asset Management.

The commercial component includes things like procurement support (as Carney is doing in housing), upstream supply chain development for emerging industries, and cost certainty, such as industrial carbon pricing. So next week, Carney will focus on the regulatory part. In the coming weeks and months, we will learn more about the finance and commercialization parts of his infrastructure ambitions.

But at the core of it—at least how I suspect he thinks about it—Carney wants the government to be a facilitator and strategic partner whose job it is to create a more stable policy environment, coordinate with provinces, and provide upfront funding and subsidies, with the objective to ultimately de-risk projects and attract the private capital needed to accelerate development.

It’s a material evolution. We’ll see if it works.

Trump’s legal battles

The big global story this week was a U.S. court ruling that a swath of Trump-era tariffs—those imposed using emergency powers—were illegal and needed to be removed.  The ruling doesn’t cover all tariffs. Steel, aluminum, or autos are not covered but it does apply to the duties Trump imposed on Canada in March over border and fentanyl issues.

The ruling is being appealed, and Trump won’t be forced to immediately reverse course. But markets cheered the court decision, which handicaps him and undermines his leverage

At the same time, everyone understands that any long-term solution needs to be political. Here’s a quote from Candace Laing, president of the Canadian Chamber of Commerce: “The end of this trade war with the U.S. will not come through the courts. It will come when we have negotiated a durable new agreement on trade that is trusted and respected by all involved.’’

In fact, the legal developments may only be adding to the noise.

Even if Trump is forced to reverse these tariffs, he’s threatening to apply them in other ways. Uncertainty is more of a problem than the actual duties, at least in Canada’s case.  And it’s worth a reminder that the bulk of trade between the U.S. and Canada remains largely duty-free, despite the tension and threats.

RBC estimates that 86 percent of Canadian exports to the U.S. will remain duty-free even under the current tariffs.

Trump’s capital war

As the trade uncertainty continues to fester, there’s now even a new worry. Buried deep in Trump’s new budget was a “revenge” clause that poses a major risk for individuals and institutions investing in the U.S. It gives Washington unilateral power to impose taxes on non-U.S. investors from countries deemed to be implementing unfair tax policies against U.S. companies.

Specifically, the bill names digital services taxes and the adoption of the global minimum tax as being unfair to U.S. businesses. Canada has introduced both of these taxes, so in theory, our investments in the U.S., which include a big portion of our retirement savings, could be hit. Just to put this into perspective. Canadians hold more than $6 trillion in assets in the U.S.

And it raises the broader question: if our trade dependence on the U.S. is a major issue, should we also be rethinking how much of our wealth is invested south of the border?

Trudeau’s vanishing tax legacy

The Trump threat against our investment in the U.S. also sheds light on just how quickly Trudeau’s tax legacy is being dismantled.

Carney has already reversed the Trudeau capital gains tax increase and scrapped consumer-facing carbon taxes. Those two taxes were going to bring in close to $20 billion in tax revenue next year alone.

And now there will be pressure to reconsider the global minimum tax and digital sales tax.

The global minimum tax, championed by the OECD, sets a floor of 15 percent on corporate income taxes across jurisdictions. Canada has been an early mover. The U.S. has backed out of the agreement under Trump.

The DST issue, for its part, predates Trump’s return. It imposes a 3 percent tax on revenue earned by digital companies in Canada. Washington has long viewed it as an unfair cash grab targeting U.S. tech giants.

According to the federal budget, the global minimum tax was expected to raise $6.6 billion over three years starting in 2026. The digital services tax would bring in another $5.9 billion over five years, starting in 2024.

Solid quarter with some baggage

Finally, Statistics Canada released its Q1 economic data on Friday. While backward-looking, the national accounts give us the clearest snapshot of economic momentum heading into the Trump tariff drama.

The headline number was a solid 2.2 percent annualized growth, stronger than expected. That marks five straight quarters above 2 percent, which is the best stretch since 2022. It reinforces the idea that the economy has been getting a lift from lower interest rates and was in relatively good shape in the lead-up to the trade tensions.

But the headline number overstates the strength. Exports surged at a 7 percent pace between October and March as businesses rushed transactions ahead of tariffs. Another example: spending by businesses on machinery and equipment—much of which is imported—spiked in the first quarter, likely for the same reason.

Beneath the surface, consumers are pulling back, which is a bad sign. Household consumption rose just 1.2 percent annualized in the first quarter, down from 4.7 percent in the final six months of 2024.

Still, the floor is holding. The economy is growing. Even preliminary April data showed the expansion continued even during the most heated month of the trade war. So what does this mean for interest rates?

The Bank of Canada meets next week, on June 4. Markets are only pricing in a small chance of a rate cut. For now, resilience still seems to be the dominant economic theme. We can be thankful for that.