December 16, 2024 was a raucous day in Ottawa, with the sudden departure of Finance Minister Chrystia Freeland on the morning she was scheduled to table the Liberal government’s last Fall Economic Statement (FES) before a 2025 election.
Today, that economic statement is already history—an interesting artifact that represents the time we’re in, but will have no measurable effect on the country. It’s highly doubtful that it will even be passed in parliament, as the opposition and Liberal insiders alike double down on calls for Prime Minister Justin Trudeau to resign.
The FES itself wasn’t even headline news. It was buried under high-stakes political drama, and the worst day of Justin Trudeau’s political life.
But what do the contents of that economic statement tell us about how the Liberals have been preparing to head into a 2025 election? And how much does the vision in that document really differ from opposition leader Pierre Poilievre’s?
Full steam ahead on corporate tax cuts
To the extent that anyone is talking about the FES at all, they’re mostly talking about the deficit. The deficit from last year was revised upwards, in large part, to account for the funds needed to compensate First Nations children and families harmed by historic underfunding of services. But for the year we’re in, the year ending in March 2025, the deficit to GDP ratio is 1.6 per cent—higher than the 1.3 per cent projected in last spring’s budget, but still relatively low, historically speaking.
The largest single cost in the FES, by far, is a corporate tax cut—the Accelerated Investment Incentive. At $17.4 billion over five years, it makes up three quarters of all new spending outlined in the document. It’s not exactly new—it was a pre-existing tax cut that was supposed to wind down this year, but the federal government has decided instead to keep the cut rolling.
The tax cut allows companies to write off certain capital expenditures more quickly—that is, money that companies spend on fixed assets like buildings, equipment, and so on. And while there are some added advantages for investment in green infrastructure, the tax cut doesn’t discriminate against fossil fuel companies. In other words, the largest spending item in the FES was a subsidy for (among others) oil and gas companies.
The move that gained the most attention in the FES is the temporary GST holiday on certain goods, including food—but the cost of the $17.4 billion corporate tax holiday is 10 times larger and received basically no attention.
In her resignation letter, Freeland said that the federal government needs to “keep our powder dry” and avoid “costly political gimmicks,” which was widely interpreted as references to the GST holiday and the seemingly cancelled plan to send $250 cheques to working Canadians. It is, more broadly, a position that the feds no longer have the money to improve critical social programs, such as expanding child care spaces, or creating a disability benefit that isn’t insultingly small. But when it comes to corporate Canada’s wish list, it seems “our powder” can be as wet as we want
Capitulating to Trump in advance
For Freeland, the reason why Canadians can “ill afford” measures like the proposed $250 cheques is—along with her well-documented hawkish positions on federal deficits in general—because of the looming threat of tariffs coming from the United States. Given the uncertainty of Trump’s threats, the FES talks more vaguely about “weaker business investment and trade due to geopolitical tensions.”
Incoming U.S. President Donald Trump has promised to levy a 25 per cent tariff on all Canadian imports. While we have no idea if he will follow through with this, or perhaps settle on a lower number (say 10 per cent), the impact of such tariffs would be severe for Canada and Mexico.
A longstanding policy of appeasing Washington’s interests to try to guarantee uninterrupted U.S. market access for Canadian corporations has left Canada extremely vulnerable to the reckless whims of a second Trump presidency. The strategy clearly doesn’t work, or we wouldn’t be in this precarious position. The uncertainty about Trump’s trade policy, combined with the Trudeau government’s “America First” foreign and trade policy, are precisely the “geopolitical tensions” that may curb domestic and foreign investment in Canada.
So what’s the plan? The FES mentions the possibility of retaliatory tariffs against the United States, outlining how the federal government enacted “dollar for dollar” tariffs on some U.S. imports in response to the first Trump administration’s tariffs on Canadian steel and aluminum.
There are also plans to amend the Export and Imports Permit Act “to enable the government to restrict importation or exportation of items in response to actions of another country that harm Canada or to create more secure and reliable supply chains.” Presumably, this is another “America First” move aimed at countering China and deepening North American economic integration but, if it is enacted, it might be useful as a retaliatory tool against U.S. actions as well.
We can only speculate about what Trump will do, and it would not make sense to plan based on his unsubstantiated social media outbursts through new measures in the FES. But we should hope the government is thinking about how to ensure the livelihood of workers in sectors vulnerable to U.S. tariffs if they are eventually put in place. So far, the signs are not promising.
At the Council of the Federation meeting in Toronto last week, on the same day as the FES, premiers called on the federal government to invest more heavily in the military and new border security measures to appease one of President-elect Trump’s key demands on Canada.
The FES delivered by promising $1.3 billion of new spending to militarize the border with the United States, including programs to implement AI-based surveillance, new drone patrols, and greater information-sharing with the United States. Can another hike to defence spending be far away?
There is an argument for putting aside some money to respond to possible tariffs at the U.S. border. Some companies and key industries may need to be propped up, workers’ income insured. Where private investment lacks—in production and services deemed essential or critical—public investment could move in. Canada owns a pharmaceutical factory in Montreal, though the government seems unwilling to manufacture anything of public health value there.
The FES announces the government will consider domestic content requirements on federally funded infrastructure projects. It is a rare good idea in a document that otherwise aims to appease the U.S. and follow Trump down a rabbit hole of deregulation and corporate tax giveaways.
What would the Conservatives do differently?
Federal Conservative leader Pierre Poilievre used the opportunity, as usual, to call for an election. One can’t really blame him—his party would win a supermajority if an election were to be held tomorrow.
What he didn’t do, really, was lay out what he would do differently from the FES. Of course, the Conservatives would slash the carbon tax, as they never tire of saying. But the Liberals’ core strategy—of using tax incentives for the private sector to pursue public goals—would likely be the same.
Poilievre, for his part, also seemed eager to embrace Trump’s demands, in a fiery speech about the need to “fix the border” and retain the relationship with “our greatest ally,” the United States.
The Conservative playbook has typically been tax cuts and subsidies for corporations, deep integration with the U.S., tight controls on immigration, and enhanced military capacity. All of those elements are in this year’s FES. We can expect a Poilievre government will double down on these themes even as it pursues an austerity agenda.
It might not ever get passed into law, but this FES really does clearly signal where this federal government is at now—completely out of ideas, absconding its own leadership over key files, and capitulating to the demands of right-wingers both at home and abroad.
We’re past the point, really, of hoping for minor incremental changes to federal policy—we’re heading uncharted territory. The modest gains of the last decade are most certainly at risk. And no political leader seems to have any vision for what to actually do about it—while corporate elites laugh all the way to the bank.
