If the Trudeau government plans to take steps to address the economic risks of the Donald Trump presidency, they won’t be in the upcoming federal budget.
Following weeks of meetings between Liberal cabinet ministers and the Trump administration, sources say the Liberals feel they can proceed with the plan it laid out before the U.S. election.
Finance Minister Bill Morneau’s second budget March 22 comes as the federal government, the Bank of Canada and the business community struggle to gauge the unpredictable policy direction from what is by far the country’s top trading partner.
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There are widespread concerns on this side of the border that U.S. policies under discussion – including possible changes in trade and taxes – could have major economic consequences for Canada.
For weeks, if not months, Morneau has deftly sidestepped questions about whether his budget would include some kind of response or risk adjustment in the face of Trump-related uncertainty.
This week, however, he sounded more assured.
“Our budget will be about Canada,” he said Tuesday. “It’ll be about Canadians, and I’m confident that we’ll help Canadians get the skills they need in a challenging economic environment.”
Last week, Morneau’s quest for clarity from and a stable relationship with the Trump administration took him back to Washington, where he met for the first time with his U.S. counterpart, Treasury Secretary Steve Mnuchin.
In February, he met with senior White House economic advisers Gary Cohn, Kenneth Juster and Dina Powell, as well as Sen. Orrin Hatch, chair of the finance committee, and Sen. Mike Crapo, chair of the banking, housing and urban affairs committee.
Canada’s Trump-related economic worries include a possible border adjustment tax, protectionist policies, a renegotiated North American Free Trade Agreement and corporate and personal tax reductions that some fear could kneecap Canadian competitiveness.
The federal government, however, likely has time to assess the situation because it’s still too early to know the fate of many U.S. proposals.
For example, Commerce Secretary Wilbur Ross said this week that NAFTA negotiations, which are likely to last about a year, probably won’t start before late 2017.
Regardless of the budget, the Liberals will remain engaged with Washington to avoid surprises and will closely monitor any signals of change, said a source who spoke on condition of anonymity because he was not authorized to discuss the matter publicly.
Case in point: Foreign Affairs Minister Chrystia Freeland spoke Thursday with Ross, during which she talked up the Canada-U.S. trading relationship and its role in fostering jobs and growth in both countries, her office said in a readout of the call.
She also “raised the potential implications and costs of any U.S. border adjustment tax on both American and Canadian businesses and families,” it said.
In recent weeks, the Trudeau government has faced pressure from political rivals to use the budget as a tool to help inoculate the Canadian economy from potential U.S. threats, even if Trump’s economic road map has yet to materialize.
“With Mr. Trump moving to drastically reduce taxes, what businesses need to hear is that we will do the same thing here in Canada to create jobs,” interim Conservative leader Rona Ambrose said Thursday during question period.
“Lowering taxes to compete with the United States should be done in this budget – the sooner, the better. So, what is the prime minister’s plan to make sure Donald Trump doesn’t steal our jobs?”
Ambrose has been critical of Trudeau’s government for policies she says are piling up costs for businesses. The Tories say Liberal carbon-pricing plans will make energy more expensive, while the government’s push for the Canada Pension Plan expansion will add costs for companies in the form of “payroll taxes.”
