Canada's Prime Minister Mark Carney Unveils Ambitious Federal Budget Plan

Tue Nov 04 2025 20:35:11 GMT+0200 (Eastern European Standard Time)

In a bold move, Prime Minister Mark Carney prepares to announce Canada's first federal budget, promising sacrifices and significant investments to revitalize the economy amid ongoing trade tensions.

Prime Minister Mark Carney is set to deliver his first federal budget, emphasizing the need for sacrifices as Canada faces economic challenges exacerbated by U.S. tariffs. He plans to introduce measures that include substantial cuts and significant investments aimed at reducing dependency on U.S. trade. The budget will also address Canada's commitment to NATO spending. Analysts predict a federal deficit may exceed C$70 billion, and political maneuvers are necessary for passage in a divided parliament.

Prime Minister Mark Carney is set to present his government's first federal budget on Tuesday, and has warned Canadians to expect sacrifices as he aims to transform an economy battered by US President Donald Trump's tariffs.

Carney has said the spending plan will see both significant cuts and generational investments to strengthen the economy and reduce the country's reliance on US trade.

The plan is also expected to lay out how Canada will pay for billions of dollars in defence spending to fulfil the new NATO commitment to spend 5% of GDP on defence by 2035.

Analysts have suggested the federal deficit could exceed C$70bn ($50bn; £38bn), up from $51.7bn last year.

The fiscal plan is seen as a major test for Carney, a former central banker for Canada and the UK who has promised to make Canada's economy the strongest in the G7 group of wealthy nations.

We used to take big, bold risks in this country. It is time to swing for the fences again, he said in a pre-budget speech last month.

Canada, which trades primarily with the US, has a particular exposure to tariff shocks. Carney has set a goal for the country to double its non-US exports in the next decade.

Joy Nott, a partner at KPMG Canada who focuses on trade and customs, emphasized that Canadian companies need government support during the transition of moving from one market to another.

Finance Minister Francois-Philippe Champagne underscored the made-at-home message on Monday as he bought new shoes - a political pre-budget tradition for federal finance ministers - at a Quebec business that supplies footwear worldwide as well as to Canada's armed forces and RCMP officers.

While he said the budget would focus on investments, Carney has promised to balance the federal operating budget over the next three years.

Over the summer, federal ministries were asked to find ways to cut up to 15% from programme spending to fund initiatives in trade infrastructure, housing, and industries impacted by tariffs.

It remains unclear where the Liberal Party will find the support needed to pass the spending package, as they are three seats short of a majority.

Canada faces a potential snap election if the budget vote, a confidence vote, fails, although this is considered unlikely.

Prof. Elizabeth McCallion from the University of Toronto noted the necessity for cooperation, particularly with the left-wing NDP, who may abstain to allow the budget to pass.

Trump's 35% tariff on Canadian imports and global US tariffs on metals and lumber have significantly impacted Canada's economy, contributing to rising unemployment.

The Bank of Canada projects modest GDP growth in the coming years, further highlighting the need for a strategic economic approach from Carney.