Can Mark Carney Trump-proof Canada’s economy?

After decades of closer ties with the U.S., Canada's prime minister is pushing large infrastructure projects and looking for new markets

Prime Minister Mark Carney speaks to the media at the Canadian Embassy in Paris, France on Tuesday, Jan. 6, 2026. After winning the federal election in April last year, Mark Carney told a crowd of Liberal supporters, "President Trump is trying to break us so that America can own us. That will never ever happen." Photo by Christinne Muschi /THE CANADIAN PRESS

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Hours after he won a remarkable election campaign in April, Canadian Prime Minister Mark Carney delivered a stark warning about how the country’s neighbour and closest ally was becoming its greatest threat.

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“America wants our land, our resources, our water, our country,” he said to raucous cheers. “President Trump is trying to break us so that America can own us. That will never ever happen.”

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Carney’s response is beginning to take shape. Facing the Trump administration’s tariffs and jibes about Canada becoming the 51st US state, the prime minister is trying to put in place a new model that would reduce dependence on the United States and reimagine the economic geography of the country.

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Three and a half decades after Canada signed up to NAFTA — a North American trade deal that deepened its already close economic ties with its southern neighbour — Carney is searching for a Plan B that looks beyond the U.S.

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On Friday he will meet President Xi Jinping in Beijing, the first official Canadian visit to China in close to a decade in a bid to reinvigorate trade with the Asian superpower.

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Riding Canada’s wave of newfound patriotism, Carney has launched a “nation-building” infrastructure agenda, including a high-speed rail project and port expansions that will be used to transport abundant natural resources to new markets. While around three quarters of Canada’s exports currently go to the U.S, the government wants to reduce this to half.

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Canada is looking to become the first Group of Seven country to have an operational small modular reactor, will build a new wind farm off the Atlantic coast, wants to double liquefied natural gas production and extract critical minerals in remote parts of the country.

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The significance of these plans has become even more pressing after the U.S. military’s capture of Venezuelan President Nicolás Maduro and Trump’s seeming obsession with taking Greenland by any means necessary. Some Canadians fear they may be next in Trump’s bid for hemispheric control akin to 19th-century mercantilism.

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Canadian Prime Minister Mark Carney inspects an honour guard while accompanied by Premier of China Li Qiang during an official welcoming at the Great Hall of the People in Beijing on Thursday. Photo by THE CANADIAN PRESS/Sean Kilpatrick

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The other side of the Carney strategy involves the government adopting a more active industrial policy to try and direct the economy and reduce red tape. Carney has unveiled a shake-up within the bureaucracy that is intended to streamline and accelerate the development of such projects in under two years, via a new federal government agency called the Major Projects Office (MPO).

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“We are moving at a speed not seen in generations to build ports, railways, energy grids — the major projects that will unlock Canada’s full economic potential and build Canada strong,” Carney said when launching the MPO in August.

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Brian Rathbun, at the University of Toronto’s Munk School of Global Affairs and Public Policy, says that as access to the U.S. becomes less certain, the government needs to take a much more active role to reorient the economy.

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“There is an important psychological element in the creation of the MPO as it marks a philosophical shift in how Canada thinks,” he says. “The state has to actively lead Canada through the narrow straits with Carney as the captain.”

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Royal Bank of Canada expects an overall budget deficit for this year of 3.3 per cent, which is not dramatic compared to other countries at the moment — the U.S. is running deficits closer to six per cent of gross domestic product. But it represents a significant fiscal expansion compared to the pre-pandemic average of 0.4 per cent in the two decades prior to 2019, according to Fitch, the rating agency.

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Some critics say that the new building program is the result of political haggling between the provinces rather than a coherent new strategy. They also suggest the program is too top-heavy and does little to encourage private business. In particular, plans for new pipelines could run into significant opposition.

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However Jeremy Barretto, a partner at Cassels, one of Canada’s largest law practices, says that the plans reflect a necessary reimagining of Canada’s economic model.

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“It has become clear that Canada needs more direct access to global markets, especially for energy and other resource commodities,” he says.

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Barretto says the new government office could help boost growth if it permits projects to advance more efficiently.

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“If successful, these efforts would result in more major infrastructure being built, improved access to international markets and global pricing for Canadian resources, and ultimately a bulwark for the domestic economy,” he says.

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“Lead us, Big Daddy!”shouted out a female Liberal Party fan during a Carney election rally — a viral moment that seemed to capture the demand for a more paternalistic approach.

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Carney might seem an unusual figure to lead a push for bigger government and state intervention. The son of schoolteachers in Alberta, he built a career in the financial and economic elite that had for several decades bet on ever-closer economic integration with the U.S.

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He established a reputation as a sober technocrat who oversaw the Bank of Canada and Bank of England during periods of economic crisis. A three-decade career in global finance also included stints at Goldman Sachs Group Inc. and Brookfield Asset Management Ltd.

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But the geopolitical moment requires more than just technocratic skills. Although around 85 per cent of Canada’s trade with the U.S. is tariff exempt under the 2020 Canada-U.S.-Mexico free trade agreement, known as CUSMA. But that has not prevented Trump’s trade policies having a sharp impact on important sections of its economy, notably the automotive industry, steel and aluminum, and softwood lumber.

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Last month, Ontario’s Algoma Steel Group Inc. laid off 1,000 workers due to “the unprecedented 50 per cent tariff imposed by the U.S.”, says chief executive Michael Garcia. Similar announcements have been made in Canada’s lumber industry as a host of small businesses go under due to weaker demand across the board.

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In October, automaker Stellantis NV, which has received Canadian government financial support, abandoned an Ontario plant as part of a strategy to grow its business in the U.S. The fate of 3,000 Ontario workers remains unclear. General Motors Co. cut 1,200 jobs in Ontario and paused a US$1 billion investment in Quebec.

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Ottawa is bracing for an even bumpier year as the CUSMA faces a full review. The U.S. has raised a host of complaints with the trading relationship. This does not bode well for Canada, according to Toronto-based trade lawyer Barry Appleton, who says that 2026 will be “a pivotal year.”

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He adds: “The real test will be whether Ottawa can stabilize the U.S. relationship in the near term, and deliberately re-engineer Canada’s trade geography over the decade ahead.”

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Prime Minister and Liberal Party leader Mark Carney dances at a victory party in Ottawa after the Liberals won the federal election, on April 29, 2025. Photo by Dave Chan/AFP via Getty Images

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Carney has so far walked a careful line. As well as tough talk that Canada was “not for sale,” the prime minister has made a number of concessions to the White House and has often adopted a more accommodating tone with Trump. Most of Canada’s retaliatory tariffs on the U.S. have been lifted and Carney dropped the “digital services tax,” a levy that targeted U.S. tech giants like Amazon.com Inc., Netflix Inc. and Meta Platforms Inc.

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Late last year, Carney personally apologised to Trump, who dramatically ended U.S.-Canada trade talks after Ontario ran an advertising campaign featuring former president Ronald Reagan criticizing tariffs.

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But while seeking to limit new confrontations with the U.S., Carney has pushed ahead with ways to make it easier to export Canadian goods to markets in Europe, Asia and Latin America.

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In November, Carney announced an agreement with oil-rich Alberta that paves the way for a new pipeline to the west coast of Canada, this one to provide access to Asian markets.

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“Canada has what the world wants,” Carney told leaders of the Association of Southeast Asian Nations in October, hoping to strike deals with the Indo-Pacific region.

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Despite the official enthusiasm to sell Canadian crude to Asian buyers, no private-sector proponent has come forward with the billions required to build such a huge infrastructure proposal, in part due to weak oil prices that make investors wary.

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In an effort to boost commerce within the country, Carney has pushed to reduce intra-provincial trade barriers — from veterinarian licensing rules to cross-border sales of meat and wine — decades-long anomalies that add up to a seven per cent tariff on domestic trade.

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The biggest innovation has been the establishment of the government office for major projects with powers to override existing laws as a way to fast-track approval for strategic projects.

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Carney has promised to slash Ottawa’s infamous red tape that historically sees a new mine take more than a decade to open. “Canada has always been a nation of builders,” said Carney in August at the MPO launch. “At this hinge moment in our history, Canada must draw on this legacy and act decisively to transform our economy from reliance to resilience.”

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Rathbun, the academic, says that Canada’s reliance in recent decades on American markets gave its industrial policy a “lackadaisical quality.”

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Donald Savoie, a former career civil servant turned academic at l’Université de Moncton, New Brunswick, says that much like former United Kingdom prime minister Margaret Thatcher did in the 1980s, Carney has decided Canada’s bureaucracy is not up to the present challenge.

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“It is too slow, too wedded to the status quo and too risk averse. Thatcher established special executive agencies to get things done and Carney is establishing an MPO,” he says.

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For business leaders, these measures are an important shift after a decade of former prime minister Justin Trudeau who made social justice issues one of his main priorities.

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“Carney has a massive challenge on his hands because economic concerns in general were issue number 500, for the full length of the 10-year Trudeau government,” says Dan Kelly, president of Canadian Federation of Independent Business (CFIB).

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Yet while Carney’s plans have received backing in many quarters, there is also no shortage of critics.

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The pledge to cut red tape has angered environmentalists and First Nations groups who, under the constitution, must be consulted and provide ultimate consent should their land or resources be affected.

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Energy Minister Tim Hodgson brushed off First Nations concerns about not being involved in pipeline discussions by offering them a “Zoom” call at short notice. He later apologized for “the poor choice of words” and offered an in-person meeting. First Nations groups also criticized Ontario Premier Doug Ford who said his province was fast-tracking plans to develop critical mineral mining in the Ring of Fire site.

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The Haida nation, one of Canada’s most influential Indigenous governments known for its landmark legal victories, “strongly opposes” the approval of the Ksi Lisims LNG project and has rejected any moves for a new oil pipeline to the west coast, fearing an oil spill. Carney met Coastal First Nations leaders on Tuesday before leaving for China.

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“Our nations understand the economic challenges Canada is facing, which is why we are ready to help facilitate major projects that are built in partnership with Indigenous peoples, protect the environment, and will benefit all Canadians,” said Marilyn Slett, president of the Coastal First Nations-Great Bear Initiative shortly after meeting Carney.

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Opposition Leader Pierre Poilievre, meanwhile, has labelled the MPO as “Mostly Photo Ops” based on decisions that are politically motivated rather than economically sound.

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Technology investor Jim Balsillie during an interview in Toronto. Photo by Cole Burston/The Canadian Press files

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“Most of these projects were on the verge of happening anyway, as they have already gone through years and years of Liberal bureaucracy,” he said in November. “He’s not actually getting anything done.”

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Others suggest the government is playing favouritism either with key Liberal Party electorates or with powerful Conservative provincial premiers like Ford in Ontario or Alberta’s Danielle Smith.

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Some in the business community fear that Carney’s focus on big, government-led projects ignores the importance of business in generating growth.

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Heather Exner-Pirot, at Ottawa’s Macdonald-Laurier Institute think tank, says the MPO has chosen only 13 large multibillion-dollar projects, when the Natural Resources Canada inventory has a list of more than 500 proposals either currently under construction or planned within the next 10 years. She says that the MPO “picks winners and losers” rather than creating “an environment for the private sector to thrive” across the country.

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“These are all fine projects. But for the most part, these have already been approved. What they did need was more financing,” she says. “Unfortunately, a lot of these projects will cost Canada money, not make Canada money.”

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Kelly of the CFIB says too often Ottawa misses business basics in favour of sweetheart deals to attract foreign investment.

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“It’s almost like saying, ‘we know it doesn’t make sense to do business in Canada, so if you come here, we’ll give you a billion dollars.’ And that’s where we need to do a complete rethink,” he says. “I often say, the best thing Canada needs is, simply, for every small or medium business in the country to hire one new person.”

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Robert Asselin, a former adviser to two prime ministers and the chief executive of U15 Canada, an association of 15 research universities across the country, says that over the past decade productivity performance has rapidly declined. Yet growth ultimately comes from technological innovation.

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“This is not easy, but this is what Canada needs to focus on now,” he says.

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Paul Beaudry, a former Bank of Canada deputy governor and now a Vancouver-based academic, says the government needs to take more risks and support a wider number of smaller- or medium-sized proposals.

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“We’re not really a country that celebrates innovation and that’s the economy of the future, just look at the U.S.,” he says.

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Beaudry says politicians like to promote “big shiny things” rather than try to sell abstract ideas like intellectual property. “I’m scared we’re going to be concentrating investment too much in the old economy,” he says.

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Jim Balsillie, the former chair of BlackBerry Ltd. who now chairs the Council of Canadian Innovators, says today’s economies and companies grow from a basis of data, artificial intelligence, patents and other intellectual property that the MPO is not prioritizing.

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He adds: “While it’s necessary to get Canadian resources out of the ground and to global markets, remarkably there is yet no orientation to the 21st-century value-added economy.”

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Additional work by Chris Campbell, Irene de la Torre Arenas and Peter Andringa

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© 2026 The Financial Times Ltd

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