OTTAWA (Rajeev Sharma): Prime Minister Mark Carney has tabled his first federal budget, unveiling a far-reaching economic plan that seeks to redefine Canada’s role in the world and rejuvenate its economy amid shifting global tides. The blueprint outlines bold spending, sharp reforms, and a vision to position Canada as a leader in clean energy, innovation, and global trade.
Finance Minister François-Philippe Champagne, who presented the budget in Parliament, called it a “decisive response to a time of profound transition,” stressing that the government must adapt swiftly to emerging global and domestic challenges.
Here’s a closer look at six key highlights from the 2025 Canadian federal budget.
1. Heavy Spending Coupled with Fiscal Tightening
Carney’s budget represents one of the largest federal outlays in Canadian history, allocating nearly C$280 billion to infrastructure, defense, and green energy projects. The expansive spending plan could drive the federal deficit to C$78.3 billion, but Carney insists the investments are necessary to “secure long-term prosperity.”
At the same time, the plan introduces C$60 billion in spending cuts over five years, including a 10% reduction in federal jobs—roughly 40,000 positions—achieved through retirements, restructuring, and the introduction of artificial intelligence in public administration.
The fiscal document also separates day-to-day expenditures from growth-oriented capital investments, a move meant to reassure investors that Canada’s borrowing will be tied to measurable returns.
2. Diversifying Beyond the U.S.
While the U.S. remains Canada’s largest trading partner, the new budget makes clear that Ottawa wants to lessen its economic dependence on Washington. Following recent tariff tensions and political uncertainty, Carney’s government aims to double exports to non-U.S. markets within ten years.
New funding will support Canadian firms looking to expand into European and Asian markets, offering assistance for market studies, legal services, and export certification.
The plan also proposes lowering Canada’s marginal effective tax rate from 15.6% to 13.2%, making it more attractive to global investors. “This is about future-proofing our economy,” said Champagne. “We want Canada to be where innovation and investment naturally converge.”
3. Clean Energy Takes Center Stage
Environmental policy is a cornerstone of Carney’s vision. The budget includes a Climate Competitiveness Strategy that replaces older emissions caps with targeted investments to make Canada a global clean energy hub.
The plan emphasizes nuclear power, carbon capture technology, and low-emission LNG production. It reaffirms a national carbon pricing system while pledging stability for businesses through predictable long-term carbon costs.
“Our future prosperity depends on clean growth,” Carney said. “Canada must lead, not follow, in the energy transition.”
4. Military and Arctic Security Get Record Funding
For the first time in decades, Canada will dramatically expand its defense budget, committing C$81.8 billion over the next five years. This increase will allow the country to meet NATO’s 2% of GDP target immediately, with a longer-term goal of reaching 5% by 2035.
The spending will modernize the armed forces, boost military pay, and fund new cybersecurity and satellite capabilities. A significant portion—C$1 billion over four years—will go toward dual-use Arctic infrastructure, enhancing both national defense and northern development.
5. Rolling Back Trudeau-Era Policies
Carney’s fiscal plan represents a clear break from the policies of former Prime Minister Justin Trudeau. Among the major reversals:
- Elimination of the consumer carbon tax, replaced by a market-based carbon pricing system.
- Suspension of the EV sales mandate and reversal of proposed capital gains tax hikes.
- Reduction of immigration targets, cutting the number of temporary residents from over 670,000 to about 385,000 next year.
- Termination of the “Two Billion Trees” project and the luxury tax on high-end vehicles and yachts.
“These changes are about restoring balance and accountability,” Champagne said. “We’re focusing on what works, not what sounds good.”
6. Shielding Canadian Industry from Trade Turmoil
With the U.S. imposing sweeping tariffs on steel, aluminum, lumber, and automobiles, Canada’s manufacturers have been hit hard. The budget introduces C$5 billion in relief funding over five years to help affected sectors adapt.
In addition, a C$10 billion loan program will provide bridge financing for struggling but viable firms. Algoma Steel Inc., one of Ontario’s major steel producers, is expected to be the first beneficiary.
The government is also launching a Buy Canadian initiative to ensure that public infrastructure projects prioritize domestic goods and suppliers. Revenue from Canada’s retaliatory tariffs—estimated at C$6.5 billion so far—will help fund these programs.
A Turning Point for Canada’s Economy
Carney’s first budget signals a clear departure from the past—an attempt to reposition Canada in a more turbulent global economy while reaffirming its social and environmental commitments.
With a blend of fiscal restraint, strategic investment, and a focus on national resilience, the Carney government is betting big on transformation.
Whether this bold experiment succeeds may define not only Carney’s tenure but the trajectory of Canada’s economy for the next generation.
