2024-11-02 05:25:00
(Ottawa) Finance Minister Chrystia Freeland is expected to rule out the idea of presenting an economic statement this fall if Republican candidate Donald Trump wins the presidential election on Tuesday.
Updated yesterday at 6:00 a.m.
According to senator and seasoned economist Clément Gignac, it would be preferable to postpone such an exercise and instead present a formal budget at the beginning of 2025 which would take into account economic reality and the new political situation. south of the border.
Because the return to power of Mr. Trump, whose mandate was very tumultuous between 2016 and 2020, would bring its share of economic turbulence due to his promise to impose customs tariffs of 10% on all imports into the United States , including from Canada.
The Trudeau government’s decision to reduce immigration thresholds starting next year is another factor in favor of canceling the next economic statement, according to Mr. Gignac. Ottawa plans to welcome approximately 100,000 fewer newcomers than expected in 2025, or 395,000 in total. This measure alone will have the effect of hampering the growth of the Canadian economy, which is already slowing down, according to some economists.
In such a context, it would be preferable to prepare a budget that would be tabled in February instead of presenting an economic statement containing projections that would no longer hold water in the event of Donald Trump’s victory, argued Mr. Gignac in an interview with The Press.
PHOTO PASCAL RATTHÉ, LE SOLEIL ARCHIVES
Senator and economist Clément Gignac
What’s more, the Trudeau government has still not adopted a bill aimed at implementing the increase in capital gains tax that was announced in the last budget. This increase, which came into force on June 25 thanks to the adoption of a simple ways and means motion, would cease to apply in the event that the minority Liberal government is defeated in the Commons without having first adopted a bill to implement it.
“An economic statement is desirable for the sake of transparency, especially when the economic situation is volatile. But it has already happened that we didn’t have any in the fall for all kinds of reasons. So there is no obligation. That said, I would seriously question the credibility of this exercise in November,” said Mr. Gignac, listing the list of factors to be evaluated.
The impact of a Trump victory
The race for the White House is very close between Democratic candidate Kamala Harris and Republican candidate Donald Trump.
According to Clément Gignac, there is no doubt that a victory for the billionaire businessman on Tuesday would have significant consequences on the Canadian economy due to his protectionist inclinations. Year in and year out, nearly three-quarters of Canada’s exports end up in the United States.
“Will a Trump victory affect our economy? The answer is yes. But we won’t know the extent of it until next year. We know that he wants to impose customs tariffs of 10% for everyone. But will he put his words into action in January after his swearing in? Tariffs of 10% are still important for our exports,” analyzed Mr. Gignac.
If Donald Trump is elected next week, the chances of having an economic statement this fall decrease.
Clement Gignac
In an interview, Mr. Gignac insisted that if the government does not succeed in passing a bill to confirm the implementation of the capital gains tax increase as it should, the financial projections of the Minister of Finance in her last budget will no longer hold water.
He recalled that this increase should bring the Canadian tax authorities $19 billion in additional revenue over five years, including $7 billion during the current fiscal year, which ends on March 31, 2025.
“If the government is defeated in the Commons or if the government prorogues the session without having adopted this law, that has financial implications. Revenue Canada will be forced to drop this measure,” he recalled.
Work paralyzed
In any case, Finance Minister Chrystia Freeland may not be able to present an economic statement to the House of Commons this fall if Pierre Poilievre’s Conservatives continue their delaying tactics which have paralyzed parliamentary work for five weeks now.
Work is paralyzed because the Conservative Party demands that the Trudeau government provide the RCMP with all documents related to the operation of a foundation – Sustainable Development Technologies Canada – which was responsible for the distribution of hundreds of millions of dollars for projects of green technology. This foundation was abolished after the release of a devastating report from the Auditor General’s office a few months ago.
Behind the scenes, a government source confirmed to The Press that the Conservative Party’s delaying tactics “complicate the tabling of the fall economic statement.”
Minister Freeland could still table the document, but she would not be able to speak in the Commons, as is tradition, or to table a tax bill that normally accompanies the economic statement.
“If the Conservatives do not stop playing procedural games, the government will have to be creative to deliver economic transparency to Canadians,” said a government source.
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Conomic statement this fall if the situation remains uncertain, especially with the implications of a potential Trump victory looming over economic forecasts.
The current political climate could hinder the government’s ability to make significant financial decisions, and without decisive legislation, crucial measures like the capital gains tax increase may fail to be implemented. This could create a ripple effect on Canada’s economic health moving forward.
In light of all these factors, Clément Gignac emphasizes the precariousness of the current economic landscape and the necessity for a clear and effective plan from the government. Without it, both immediate and long-term financial projections may be compromised.
Additionally, Gignac points out that some key sectors of the economy may experience increased anxiety and volatility as the outcome of the U.S. election becomes clearer. Export-dependent industries could find themselves particularly vulnerable to changes in tariff policies that a Trump administration might enact.
the combination of political instability, the threat of protectionist policies, and the delay in critical tax reforms necessitates a comprehensive economic strategy to safeguard Canada’s fiscal future and maintain the country’s competitive edge in the global market.