Justin Trudeau’s economic legacy | Financial Post

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Jordan Gowling and Barbara Shecter

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Together with his get together languishing within the polls and underneath stress from his caucus, Prime Minister Justin Trudeau introduced on Monday that he was resigning as Liberal chief. The choice means Trudeau’s nine-year tenure as Canada’s twenty third chief — a interval marked by commerce battles with the USA, a worldwide pandemic and excessive inflation — will finish within the coming months. Although Trudeau used his resignation tackle to defend his file in combating for the center class, rising dissatisfaction together with his authorities’s financial insurance policies was a key think about his declining political fortunes. Right here, the Monetary Submit seems again at 10 key selections that can form Trudeau’s financial legacy, for higher or worse.

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Appointing Invoice Morneau as finance minister

When Trudeau’s Liberal Social gathering swept to energy in 2015, he tapped enterprise chief Invoice Morneau to be his first finance minister. The previous government chairman of Morneau Shepell, a human assets agency based by his household, Morneau was seen as a seasoned government who may maintain Bay Avenue completely happy whereas serving to Trudeau promote concepts to help the center class. Regardless of some controversy over Morneau’s monetary holdings, the pair gave the impression to be aligned by the beginning of the pandemic, with Morneau serving because the face of the Trudeau authorities’s wage complement and mortgage packages. However the partnership would quickly run aground, partly on account of Morneau’s function within the Liberal Social gathering’s WE Charity scandal, for which Morneau was finally discovered to have breached the Battle of Curiosity Act. Morneau’s resignation in 2020 additionally uncovered behind-the-scenes clashes with the prime minister over fiscal coverage and the trail of pandemic spending. In his memoir in 2023, Morneau claimed “political factors” and public notion received out over sound fiscal coverage when it got here to federal help packages. Finally, the priorities Bay Avenue had laid out — business-friendly tax and regulatory reform and decisive motion to curb deficits — had been by no means completed, and Morneau’s departure raised questions on what, if something, would anchor authorities spending going ahead.

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Buying the TMX pipeline

In 2018, British Columbia and Alberta had been in a bitter dispute over the enlargement of the Trans Mountain pipeline, which might triple the pipeline’s capability to 890,000 barrels of crude oil a day from Edmonton to the coast of British Columbia. Dealing with mounting authorized challenges from environmental and Indigenous teams, the Liberal authorities purchased the challenge for $4.5 billion from Kinder Morgan Inc. after the corporate threatened to cancel it. Morneau promised on the time it could not contain a giant monetary hit and that the acquisition could be an funding in Canada’s future. However development suffered many delays and setbacks and the general price shortly ballooned, rising to its present estimate of $34.2 billion. In 2024, the challenge lastly got here on-line. Whereas the associated fee has risen, the worth has, too: that features elevated income for Canadian oil corporations and higher entry to Asian markets. Getting a pipeline constructed in any respect in Canada isn’t any small feat. Whether or not the monetary price was price it might not be identified till a viable purchaser is discovered to take it off the federal government’s arms.

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Implementing the carbon tax

As a part of his inexperienced agenda, Trudeau’s authorities applied a nationwide minimal worth on carbon air pollution beginning at $20 per tonne on gasoline in 2019. That worth has elevated yearly and now at present sits at $80 per tonne. The tax shortly grew to become a political headache for the governing get together, with the Conservatives vowing to scrap it as inflation soared. Although Trudeau has relentlessly defended the measure as a needed one within the battle towards local weather change, he additionally waffled, asserting within the fall of 2023 a three-year exemption for Canadians who use dwelling heating oil. The transfer was largely seen as an effort to spice up the Liberals’ political fortunes in Atlantic Canada, the place many residents use the heating technique, and solely bolstered issues that the tax had political motivations on prime of environmental ones. The carbon tax will likely be a wedge problem in any coming election, and will divide Liberals themselves when it comes time to pick a brand new chief.

Increasing authorities and the debt

Trudeau’s legacy will embrace the numerous enlargement of the dimensions of the federal authorities and of the nationwide debt underneath his tenure. A part of this was unavoidable: The pandemic years, when lockdowns resulted in a significant contraction within the world economic system, led to unprecedented fiscal interventions in international locations world wide. New packages such because the Canada Emergency Wage Subsidy and the Canada Emergency Enterprise Account had been launched in 2020 and, although designed to assist individuals who misplaced their jobs and maintain companies afloat, got here at large price to the federal coffers. Some additionally argued that whereas well-intentioned, they went too far, had been poorly designed and had been ripe for fraud. General, the federal debt virtually doubled to $1.236 trillion in 2024 from $619.3 billion in 2015. Trudeau’s reign additionally noticed an enormous enlargement of the federal public service workforce, which elevated to 367,772 workers from 257,034.

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Rising immigration

When Trudeau entered workplace, Canada’s inhabitants stood at 35.8 million folks. In 2024, Canada’s inhabitants hit 41.4 million, an enlargement that accelerated considerably because the economic system started to re-open following the lifting of pandemic lockdowns. In 2021, Canada broke the earlier file set in 1913, by welcoming greater than 401,000 new everlasting residents. The next 12 months, Canada surpassed that file, including one other 431,645 new everlasting residents. Whereas the federal government’s preliminary choice to extend immigration was partly a response to a labour scarcity popping out of the pandemic, many started to query the influence the inflow was having on an already tight housing market and strained companies. Because the nation slogged by a GDP-per-capita recession, attitudes towards immigration — lengthy a consensus subject — started to bitter. Within the fall of 2024, following dismal approval scores, Trudeau and his immigration minister, Marc Miller, introduced a 21 per cent lower to everlasting resident ranges whereas asserting adjustments to different packages as effectively. Whereas any form of everlasting flip towards immigration appears unlikely, future governments must think about the place to attract the road.

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Failing to handle the housing disaster

One problem that has plagued Trudeau’s authorities has been housing affordability. In 2017, the federal government introduced a nationwide housing technique and funding to sort out homelessness and construct 100,000 new reasonably priced houses. However with rising immigration fuelling demand and few concrete options in place, significant enhancements in general housing provide and affordability have been elusive. Some measures, together with the housing accelerator fund, which offered direct funding to municipalities to construct extra houses, have made incremental progress, however have hardly modified the general equation. Trudeau’s authorities was additionally gradual to handle issues about overseas possession. In 2022, the federal government handed laws to implement a two-year ban on overseas buyers shopping for property in Canada. This ban was set to run out on the finish of 2024, however was expanded for an additional two years till January 2027.

Establishing common childcare

The institution of a common $10-per-day childcare program has lengthy been a Liberal objective, and if it survives might be one among Trudeau’s greatest legacies. In 2021, the Liberal authorities pledged $27.2 billion over 5 years to fund this system, which might lower the day by day price of childcare to $10 by 2025-26, by bilateral agreements with the provinces. As of 2024, all provinces had signed on. The measure was pitched as not solely a social coverage, however an financial coverage as effectively, designed to assist extra ladies take part within the workforce. This system has confronted criticisms, significantly from daycare operators who argue the funding just isn’t sufficient to cowl the associated fee burdens, but it surely has widespread help from households. Trudeau additionally launched the Canada Youngster Profit, a non-taxable quantity paid month-to-month to assist households with youngsters underneath 18. The profit has been hailed as a hit for lifting 1000’s of youngsters out of poverty, although the associated fee has been contentious.

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Pursuing free commerce

The Trudeau authorities was no stranger to commerce offers. These included USMCA (The USA-Mexico-Canada Settlement), a tensely negotiated pact that changed the North America Free Commerce Settlement. The Liberals notched some wins for Canada, together with stronger mental property protections, however then-U.S. president Donald Trump’s threats to slap quotas or a ten per cent tariff on Canadian aluminum dampened enthusiasm for the deal. Now again for a second time period, Trump has threatened a blanket 25 per cent tariff on Canadian and Mexican items and stated he’s going to “have quite a lot of enjoyable” reopening the commerce talks. Throughout Trudeau’s 9 years in energy, his authorities was additionally instrumental in negotiating the Complete Financial and Commerce Settlement with the European Union and its member states, and the Complete and Progressive Settlement for Trans-Pacific Partnership, a free commerce settlement between Canada and 10 international locations within the Indo-Pacific, in addition to the UK.

Betting large on the EV trade

Trudeau’s authorities has spent billions on the promise of an electrical automobile revolution, funding manufacturing by direct funding and incentives resembling tax credit and subsidies. The cash for the EV provide chain has come whilst critics questioned whether or not sufficient EVs might be bought to satisfy a pledge to get gas-fuelled automobiles and passenger vehicles off the highway by 2035. The Liberals’ commitments symbolize the most important inflow of funding into Canada’s auto sector in a minimum of a technology, and can make for one among Trudeau’s greatest financial legacies — offered every part works out. And there have been setbacks: Decrease-than-expected demand for electrical autos has been cited for manufacturing delays by Ford Motor Co. and Basic Motors Co., whereas Sweden’s Northvolt AB, which deliberate to construct a battery-cell manufacturing facility close to Montreal, introduced a strategic evaluate in August after which sought creditor safety in November. Whereas Trudeau billed these as mere bumps within the highway to the EV future, it’s too quickly to inform how important the influence will likely be.

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Falling out with Chrystia Freeland

The bombshell resignation of Trudeau’s closest ally and second finance minister, Chrystia Freeland, will likely be remembered because the tipping level that ended his run as prime minister. Her resignation got here simply hours earlier than she was set to desk the federal government’s fall financial replace. If her resignation letter is taken at face worth, the basis reason for the falling out, as along with her predecessor, Invoice Morneau, was the federal authorities’s fiscal spending. She outlined the necessity to maintain the nation’s “fiscal powder dry” given the specter of tariffs by the incoming Trump administration. The autumn financial assertion revealed an almost $62-billion deficit, blowing previous the fiscal guardrail Freeland had set the 12 months earlier than. When requested about whether or not Freeland’s resignation was the catalyst that led to his resignation, Trudeau advised reporters: “I had actually hoped that she would conform to proceed as my deputy prime minister and tackle probably the most vital information that not simply this authorities, however this nation is dealing with, however she selected in any other case.”

—with information from Gabriel Friedman

• Electronic mail: bshecter@nationalpost.com

• Electronic mail: jgowling@postmedia.com

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