Canada’s latest federal budget offers an increasingly coherent response to U.S. tariffs and years of economic stagnation, but Ottawa has yet to articulate a fully developed national industrial policy, according to economist Julian Karaguesian.
In an Energi Talks interview with publisher Markham Hislop, Karaguesian said the November 5 budget brings together support for industries affected by Donald Trump’s tariffs, efforts to diversify exports and measures intended to encourage domestic and foreign investment.
Many of the initiatives had been announced before budget day, he said. Their significance lies partly in how they fit together.
Tariff relief and new trading relationships
Karaguesian described a collection of programs supporting industries that have lost business because of tariffs, including steel. Individually, some measures are relatively modest, but collectively they represent billions of dollars in assistance, he said.
Ottawa is also reallocating resources to strengthen trade relationships with countries including China, India, Indonesia and Mexico, as well as Europe. The objective is to reduce Canada’s heavy dependence on the U.S. market.
Major infrastructure is another central element. Karaguesian pointed to port expansions, pipelines and LNG projects as examples of investments intended to improve access to markets beyond the United States.
A tax incentive for investment
The productivity mega deduction could play an important role in that strategy, Karaguesian said. It allows businesses to deduct eligible capital expenditures, including qualifying equipment and software, up front rather than spreading deductions over many years.
He cautioned that a tax measure alone would have limited impact during economic stagnation. Combined with public infrastructure investment, efforts to attract private capital and expanded market access, however, it could encourage companies to invest.
Old industries and new technologies
Asked whether the government is reinforcing established industries or building new ones, Karaguesian said the answer is both.
Western resource exports remain an important focus, particularly LNG and related infrastructure. At the same time, he pointed to federal support for artificial intelligence, research partnerships and discussions with Europe about independent digital infrastructure.
The automotive industry is less certain. Karaguesian said Canada has not yet developed a comprehensive nationwide industrial policy, although he expects the government’s approach to evolve.
He traced the erosion of Canadian manufacturing to several forces, including offshoring, currency appreciation and the restructuring of North American automotive production.
Growth beyond the headlines
The interview also addressed Canada’s weak productivity performance and stagnant real income per person. Karaguesian questioned political claims of economic leadership that fail to reflect the pressures many households face.
He characterized the budget as investment-focused rather than consumption-focused, with government resources directed toward infrastructure and productive capacity.
For Canada, the unresolved test is whether those investments translate into more competitive industries, higher productivity and lasting gains in living standards.