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The
government projects spending of $603 billion Canadian (US$431
billion) and a $62.3 billion Canadian (US$44.5 billion) deficit
for 2026-27, $3 billion Canadian (US$2.1 billion) less than
forecast in April.
Canada’s combined federal, provincial and local government
deficits amount to 2.5% of its economy, compared with 8.5% in
the United States, according to International Monetary Fund
figures cited in the budget.
“The United States is upending global trade,” the budget
declares.
It comes two days after Democrats gained control of the U.S.
Congress in midterm elections, weakening Trump’s political
position as the countries pursue a possible trade agreement.
The government expects Trump’s trade war to slow economic growth
late this year and early next year, with the budget forecasting
growth of just 1% in 2026 and 1.7% in 2027.
A previously announced tax incentive would allow businesses to
immediately deduct qualifying investments, reducing Canada’s
effective tax rate on new investment to 6.4%, less than half the
comparable U.S. rate. The measure is estimated to cost $36
billion Canadian (US$25.7 billion) over five years.
Carney, a former governor of the Bank of Canada and the Bank of
England, aims to double exports outside the United States by
2035 while forging closer ties with Europe and Asia.
The budget advances plans for Canada’s first national sovereign
wealth fund, a $25 billion Canadian (US$17.9 billion) initiative
to invest in Canadian companies and major projects.
It outlines $7.7 billion Canadian (US$5.5 billion) to strengthen
Canada’s defense industry, with a goal of awarding 70% of
military contracts to Canadian firms. Canada says it is on track
to meet NATO’s target of spending 5% of GDP on defense and
security by 2035, though the budget does not fully account for
the cost.
Canada walked away from trade negotiations in August over U.S.
demands that Carney said threatened Canadian sovereignty and
cultural protections.
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