Can your vote fix Canada's economic puzzle?

Peter Morrow, an associate professor of economics at the University of Toronto, encapsulated the pervasive uncertainty hanging over the Canadian economy as it heads into a pivotal federal election, musing, "Is the U.S. really ever going to be a good-faith trade partner ever again? It’s a reasonable question to ask."

As Morrow and many others recognize, this election transcends typical domestic policy debates, unfolding against a backdrop of unprecedented U.S. trade aggression and global economic instability.


Canada, even in a hypothetical domestic vacuum, faces daunting challenges: a prolonged period of weak productivity, the complex integration of historically high immigration levels, and a housing market that has spiraled into decades-long unaffordability.

However, the reality is far from a vacuum. U.S. President Donald Trump's protectionist policies and tariff threats have fundamentally reshaped the economic landscape, casting a long shadow of uncertainty over Canada's future.

Liberal Leader Mark Carney and Conservative Leader Pierre Poilievre, despite their ideological differences, agree on the core economic imperatives: more housing, increased investment, expanded resource development, and diversified trade partnerships.

Their agreement, however, ends at the diagnosis. The parties' proposed solutions, particularly regarding fiscal policy and trade, offer starkly contrasting visions for navigating this turbulent economic climate.

The immediate challenge lies in addressing the U.S. trade threat.

While Canada has thus far avoided the worst-case scenario, with exemptions granted for certain goods under the USMCA, the Sword of Damocles remains suspended.

As Morrow suggests, Canada must grapple with its strategic position: "If you think about there being a number of different centres of geopolitical power going forward over the next couple of decades, does Canada want to be part of Fortress North America, and really march in lockstep with the U.S.? Or does Canada want to diversify, and perhaps pursue relationships with Europe more carefully, or more provocatively with China?"

Carney's $5-billion trade infrastructure fund and $25-billion export credit facility signal a push for diversification, targeting South American and Southeast Asian markets.

Poilievre, conversely, prioritizes expedited energy infrastructure to bolster resource exports and seeks trade agreements with the UK, New Zealand, and Australia.

Fiscal policy presents another point of divergence. Both parties promise increased spending and tax cuts, inevitably leading to continued deficits.

Carney proposes separating operating and capital expenses, while Poilievre projects smaller deficits through dynamic scoring.

However, as Bank of Nova Scotia economist Rebekah Young warns, "The net impact of potentially weaker growth, higher borrowing needs and a potentially higher-borrowing cost environment suggest the federal government has reduced margin for policy error."

Housing, a critical issue, sees both parties aiming for 500,000 new homes annually. Economists like Mike Moffatt, however, deem this target unrealistic.

The debate extends to the role of government, with Carney advocating for direct involvement through agencies like Build Canada Homes, and Poilievre favoring deregulation and private sector solutions.

Investment, already lagging before Trump's return, faces further uncertainty. While both parties oppose the capital gains inclusion rate increase, the question remains whether their policies can offset the chilling effect of trade uncertainty.

BMO's Doug Porter notes, "Even if the tariffs go away eventually, we’re still going to have this cloud of uncertainty that’s going to put a serious chill on business investment, no matter what the parties do."

The labor market, grappling with potential trade-related job losses, faces the added challenge of integrating recent immigration surges.

Both parties have pledged support for displaced workers and a more cautious approach to immigration.

Carleton University's Christopher Worswick highlights the complexity: "That makes sense, but it’s a very complicated environment to figure out what’s going to happen in the labour markets. The demand side is probably going to shrink because of the trade disruption and the supply side could shrink as temporary residents leave. That will be tricky to navigate."

Finally, energy policy, once a battleground, now sees a surprising consensus on the need for pipeline development.

However, as energy analyst Rory Johnston points out, "If we do have another pipeline to tidewater in either direction, east or west, it’s been my contention for a while that it’s going to require some participation from the Crown, if not a majority participation."

As Canadians head to the polls, they face a stark choice: two distinct economic paths, each promising to navigate the challenges of a volatile global landscape and a complex domestic reality.