Lifting the Canadian economy is a huge task
Canada enters the second half of the 2020s facing a crowded and sometimes contradictory policy agenda. On paper its fundamentals — natural resources, educated labour, high immigration targets and strong institutions — look attractive. In practice, a string of external shocks, domestic frictions and political tensions makes the climb steep. The recent surge in protectionism from the United States, a re-shaping of trade ties, long-running infrastructure delays, housing weakness, social strains linked to low-paid immigrants and organized crimes, and renewed provincial separatist talk together explain why “lifting the Canadian economy” is anything but simple.
1. Higher U.S. tariffs: a sudden external shock
The U.S. administration’s 2025 tariff program (covering many trading partners) has levied much higher duties on numerous imports — in some cases 25–50% — and Canada has been among the countries most affected by steep new rates (many goods now face duties around 35% under the policy roll-out). Those tariffs have immediate implications for exporters, supply chains and investors’ confidence and raise the near-term risk of slower growth and higher consumer prices. The Bank of Canada and private forecasters have repeatedly warned that such trade frictions will dampen economic activities and complicate monetary and fiscal choices.
2. Trade balances: the U.S. still matters — but so do other partners
Canada remains deeply integrated with the United States: goods and services exports to the U.S. rose materially into early 2025 (StatCan shows a jump from roughly US$179.3bn in Q4-2024 to about US$191.0bn in Q1-2025), keeping America by far Canada’s largest partner. But the tariff shock and diversified supply-chain responses are nudging Canada to rebalance its trade links; and to try to deepen ties with Europe, Mexico & Asia, where feasible. That reorientation is costly & slow as many Canadian producers still rely on U.S. demand and its supply chains.
3. China–Canada relations: cautious thawing amid geopolitics
Bilateral relations with China have been difficult since diplomatic crises earlier in the decade. In 2025 both capitals have signaled interest in improving ties but trust remains fragile; trade diversification is politically attractive but slow to execute. Rebuilding steady trade and investment flows with China could help Canadian exporters — particularly in agriculture, mining and manufactured goods — but it will require patient diplomacy and credible assurances on governance and market access.
4. Labour market frictions and the problem of low-paid immigrants
Canada’s immigration intake remains among the largest in the OECD: arrivals stay high (e.g., StatCan reported more than 100,000 new permanent residents in Q1-2025), and policy targets for 2025 sought near-half-a-million admissions. Yet many recent immigrants face precarious work, under-employment and wage gaps — especially newcomers without Canadian credentials. Decent integration is crucial: if newcomers are channeled into persistently low-paid roles, gains from population growth in consumption and taxes will be blunted. Policy must focus on credential recognition, targeted skills upgrading and smoother transitions from temporary status to permanent residency.
5. Labour-law inheritances and the changing workplace
Canada’s provinces hold substantial responsibility for labour law and employment standards, producing a patchwork of rules that can slow national labour-market reforms. Recent legislative and judicial developments in 2024–2025 show active reform, but “inherited” rules and legacy collective-bargaining frameworks still complicate quick adjustments to sectoral needs. This complicates employers’ ability to respond flexibly to shocks and makes national coordination on skills and training more difficult.
6. Social disruptions: gang violence and public safety
Organized crimes and gang activities continue to impose local social costs — public safety, insurance and business confidence — especially in urban areas. Canada’s history of motorcycle gangs, organized crime networks and regional criminal groups means that outbreaks of violence have economic as well as social consequences: they raise policing costs, deter investment in affected neighbourhoods and strain community trust. Tackling these problems means stronger enforcement, social programs for at-risk youth, and improved cross-agency intelligence — not just short-run crackdowns.
7. Provincial tensions and separatist stirrings
Talk of separation or stronger provincial autonomy—especially in Alberta and, periodically, in Quebec—resurfaces when federal policies clash with regional interests (energy policy, carbon regulation, transfers). While national fragmentation remains unlikely in the short term, persistent regional alienation can deter investment, complicate resource projects and raise political risk premia. Federal leadership and credible new mechanisms for revenue and regulatory co-operation are, therefore, needed.
8. Refugees, backlogs and integration challenges
Canada’s refugee and asylum system has seen large flows and administrative backlogs. The government has taken steps to reduce temporary-status overreliance and accelerate permanent residency where appropriate, but backlogs and processing delays continue to create strains on services and housing in some regions. Better case management, targeted funding and accelerated labour-market integration programs would turn a humanitarian challenge into a growth opportunity.
9. Real-estate doldrums and household balance sheets
After a spectacular run in prior years, many Canadian housing markets corrected in 2024–25. National average prices have eased (industry indexes and Reuters polls expect modest further declines in 2025), and some major cities show falling year-on-year prices even as sales recover episodically. A soft property cycle hurts household wealth, construction employment and municipal finances — and it reduces the fiscal headroom for provinces already coping with shifting federal transfers. Policymakers must balance support for vulnerable homeowners with long-term affordability and increased housing supply.
10. Infrastructure projects: big promises, frequent delays
Canada’s “Investing in Canada” plan and other public commitments have unlocked major projects, from highways to energy exports. Yet high-profile initiatives (the Trans Mountain expansion, major mining projects, and some potash projects) have experienced cost overruns, slower build outs and phased operational rollouts, reducing near-term economic payoff. Faster approvals are not enough; better project governance, realistic budgeting and Indigenous and community partnership are essential to deliver the promised economic lift.
11. Political leadership and perception: an “academic” prime minister?
The country’s leader—widely described by commentators as competent and more of an academic or technocrat in style—faces the twin tasks of addressing a shrinking policy window from external shocks while keeping public support. Whether the incumbent (and the governing team) can move beyond rhetoric to a coherent economic strategy that blends near-term demand support, trade diplomacy and long-term structural reforms will be decisive for investors and households.
12. Conclusion — a multi-headed policy challenge
If “lifting the Canadian economy” is the goal, policymakers must work on many fronts at once: stabilizing trade relations and hedging against tariffs; helping immigrants earn their market value; re-energizing private investment and construction; dealing with social disorder and organized crimes; addressing provincial alienation; and finishing infrastructure projects on time and on budget. The task is huge because each pillar interacts with the others — trade shocks weaken demand, weaker demand hits municipal finances, and political discord raises risk premia. Canada’s assets are real, but the roadmap needs clearer sequencing, measurable targets and better project delivery if the country is to turn potential into broadly shared growth. Economic tasks list need to be reviewed at regular interval, so that the progress is evaluated in a realistic way.
Abbreviations
- IRCC — Immigration, Refugees and Citizenship Canada
- LNG — Liquefied Natural Gas
- PM — Prime Minister
- PR — Permanent Resident
- StatCan — Statistics Canada
- TMX — Trans Mountain Expansion (pipeline)
- U.S. — United States
Key sources (selected) Reuters on U.S. tariffs and trade impact; Bank of Canada Monetary Policy Report; Statistics Canada trade and immigration releases; Migration Policy Institute and CD Howe Centre analysis on immigrant labour outcomes; Reuters, The Financial Times and Construction/industry reporting on Trans Mountain delays and infrastructure; The Canadian Encyclopedia on organized crime; federal government IRCC and IRB statistics on refugees and backlogs
