Building a Sovereign, Value-Added, and Sustainable Economy

A fact book for the ‘Elbows Up Economic Summit’

Click here to view original web page at www.policyalternatives.ca

Introduction: The Challenges of Economic Nation Building

U.S. President Donald Trump has confronted Canadians with unprecedented threats to our sovereignty and prosperity. From his inauguration speech, when he resuscitated the imperial doctrine of ‘Manifest Destiny,’ to his subsequent threats to use “economic force” to annex Canada, to his volatile and ever-changing executive orders and tariffs, Trump has abandoned previous U.S. commitments to rules-based trade and diplomacy, and damaged (perhaps fatally) the historic alliance between the U.S. and Canada.

His latest deadline (August 1) to reach ‘deals’ with or over 100 countries – including Canada – has come and gone. At time of writing, Canadian negotiators were still trying to reach agreement around a wide range of trade, economic, and security matters with the U.S. administration, having offered concessions on several issues (including border security, defense spending, and the abolition of the Digital Services Tax) in hopes of convincing Trump to drop his tariffs. Countries which did reach ‘deals’ with Trump (more accurately described as vague, non-binding memoranda, not trade agreements in any conventional sense) are already learning they have hardly ended economic uncertainty or prevented new U.S. actions. A potent warning in this regard is the new tariffs imposed on Japan within days of reaching a ‘deal’ with Trump – the terms of which were never written down, and were subject from the outset to wildly conflicting interpretations between the two sides.

In this context, the reluctance of Canada’s negotiators to sign any similar ‘deal’ with Trump (accepting U.S. tariffs, without constraining subsequent U.S. trade actions) seems prudent. The fact that the existing Canada-U.S.-Mexico Agreement (CUSMA, which Trump has largely ignored) is subject to full review and potential renegotiation in 2026 is another reason for Canada to exercise extreme caution in the current negotiations.¹

Nevertheless, even in the absence of a ‘deal’ with Trump, Canada’s economy is already being harmed by Trump’s tariffs: including sector-specific tariffs on steel, aluminum, and automotive products, other sector-specific tariffs threatened in the future (in industries such as pharmaceuticals, heavy trucks, aerospace, and semiconductors), and an across-the-board 35 per cent tariff on other products not falling under the CUSMA. Business and consumer uncertainty arising from his trade war is also harming employment, investment, and growth in Canada. This damage will continue until some more stable trade policy environment is established. That may not be achievable until Trump has left office.

Of course, Canada is uniquely exposed to Trump’s tariffs and other actions. As a share of GDP, Canada’s exports to the U.S. are about 25 per cent of total national output,² ranking us with Mexico as the country most vulnerable to Trump’s actions. After 30 years of tariff-free continental trade, Canada’s industries have evolved so that they are now fundamentally oriented around exports to the U.S. So there is no doubt that the challenges posed by Trump to our economic and political well-being are existential in nature.

At the same time, Canada possesses a unique set of strengths that empowers us to confront the challenges posed by Trump’s policies. We have over 40 million residents, workers, and consumers. We have the 9^th largest economy in the world. We possess unique natural resources and geopolitical importance. We have a proud history of innovation, cohesion, and responding collectively to enormous challenges. Our knee-jerk tendency to compare ourselves to the U.S. may make us feel small or vulnerable. But our economy and society are increasingly comparable to those of other middle-sized powers. We should express confidence in our capability to confront Trump’s attacks and keep building a prosperous, fair, and sustainable society.

The federal and provincial governments have been working urgently to develop an economic response to Trump’s attacks, and establish a more independent long-term trajectory for investment, job-creation, and infrastructure. So far, however, public discussion about Canada’s economic strategy under Trump has been unduly influenced by loud and well-funded business voices advancing long-standing corporate demands: to cut corporate taxes, to weaken or eliminate environmental regulations, to downsize the public sector, and to build more export pipelines for oil and natural gas. These corporate demands are being supported by certain partisan and regional interests, seeking to exploit the current fear and uncertainty experienced by Canadians into accepting actions (like deregulation, austerity, and pipelines) they previously resisted. In particular, ultimatums have been set for the federal government to approve and start construction on new fossil fuel pipelines (even without permission from provinces through which they would pass), as if that alone could insulate Canada’s entire economy from future attacks.³

Far from establishing a base for a more independent Canada, this business-friendly agenda would reinforce important structural weaknesses in Canada’s current economic situation: exacerbating our reliance on extraction and export of non-renewable resources, undermining governments’ fiscal capacity, and sacrificing core social and environmental priorities in a rush to ‘build big things.’ Of course, ‘building big things’ will be essential for strengthening Canada’s economy in the face of Trump’s attacks – but the things we build need to be appropriate, necessary, and lasting. Transportation infrastructure (including urban transport and inter-city rail), housing, renewable energy generation and transmission facilities, and public services facilities (such as new early child education centres to support the roll-out of the new national child care program) all fit that bill. And the rush to build must also integrate appropriate democratic and accountability standards (including full respect for Indigenous consultation and land rights), and strong labour and environmental practices in construction and operation. Finally, the ‘non-built’ side of the economy (including provision of high-quality public and care services) will also play a vital role in economic nation building.

To broaden economic debate at this critical moment, the Canadian Centre for Policy Alternatives, the Centre for Future Work, and several co-sponsors are hosting an invitational ‘Elbows Up’ Economic Summit in Ottawa on September 15.⁴ The Summit will gather progressive economists and policy experts to propose a more positive and holistic economic response to Trump’s attacks – one that prioritizes human and environmental needs, domestic infrastructure, industrial diversification, renewable energy, housing, and care. To set the stage for the Summit, this Factbook reviews the multiple dimensions of the economic nation-building challenge facing Canada. The Factbook provides short empirical summaries of fifteen different risks, constraints, and priorities which our trade negotiators and policy-makers need to address in developing their response to Trump. These include:

Market diversification: Export industries will need to find new markets for their products (at home as well as abroad) as U.S.-bound shipments decline. Diversification is also required across sectors, not just geography, to address Canada’s dangerous and growing dependence on export of unprocessed resource products.
Domestic employment and aggregate demand: Unemployment is already rising because of Trump’s attacks (and other causes, such as previous high interest rates). Supporting job-creation and domestic spending power will be essential as Canada’s economy adjusts to global uncertainty. The role of non-traded industries (including the care economy) in stabilizing macroeconomic conditions in the face of the trade shock will be critical.
Investment, technology, and innovation: To become a full-fledged and self-sufficient industrial economy in its own right, Canada needs to drastically enhance its capacity ro produce high-value technology-intensive goods and services. This will require a sharp boost to previously stagnant business investment in tangible capital and innovation. Public investment in improved economic, technological, and social infrastructure will also need to expand.
Sustainability: Vested interests in polluting industries clearly hope Canada’s commitments to international climate goals will be watered down or abandoned altogether, in the context of fear and uncertainty caused by Trump’s attacks. That must not happen. Strengthening Canada’s emissions-reduction plan (including by ‘building big things’, such as renewable energy generation and transmission infrastructure) can boost investment and employment as we respond to Trump’s attacks.
Fiscal capacity: Most of the historic initiatives required to protect and strengthen Canada’s economy in response to Trump will involve a larger role for public sector engagement and intervention. This needs strong government capacity to fund investments and programs as part of post-Trump nation building. Public debt in Canada is manageable, and does not pose a constraint to government playing a bigger role in coming years. This is especially true for capital spending, which corresponds to the acquisition of long-lived productive assets – which count as a credit in proper public accounts, and hence does not directly increase deficits. But maintaining a strong revenue base, and resisting calls for tax cuts (which would mostly benefit businesses and high-income individuals) will be important to preserve government’s ability to play a more fulsome economic role in the years ahead.

By considering the full spectrum of economic, social, and environmental challenges facing Canada in the wake of Trump’s attacks, better perspective can be gained on the actions and strategies that hold most potential in stabilizing and growing Canada’s economy. Across-the-board tax cuts and regulatory concessions would not elicit the investments needed in new industries and infrastructure – but they would undermine public fiscal capacity, and jeopardize social and environmental goals that are part of what makes Canada different than the U.S. New petroleum pipelines would create jobs in construction, but few after that, and would reinforce Canada’s already-precarious overreliance on export of unprocessed staples – not to mention further undermining Canada’s shaky record in emissions reduction. To genuinely build a sovereign, value-added, and sustainable economy, Canada’s response to Trump needs to unleash our full capacities and ambitions as a full-fledged industrial country. This means more investment, innovation, trade, work, and care – across the full scope of the economy.

These themes will be further developed by the experts participating in the Elbows Up Economic Summit. Please watch for further analysis and commentary from the Summit and its participants forthcoming from the Canadian Centre for Policy Alternatives and the Centre for Future Work in the following weeks.

Diversifying Exports: Geography

Figure 1: Exports of Goods and Services to the U.S. as Share Total Exports

Source: Source: Calculations from Statistics Canada Tables 12-10-0157-01 and 36-10-0023-01.Get the dataCreated with Datawrapper

Canada is a trading country, but our exports are unusually concentrated in one foreign market: the U.S. At present around 70 per cent of Canada’s total exports of goods and services go to the U.S. This reflects a mixture of geography, history, and past policy choices – in particular, the decision in 1989 to enter a comprehensive free trade agreement with the U.S., that has shaped the structure of Canadian industry, finance, and infrastructure ever since. The dominance of U.S. sales in overall exports reached a peak around the turn of the century, when over 80 per cent of exports went there. The modest decline in U.S.-dependence since then is not really a ‘good news’ story, however: it reflects the decline in Canadian manufacturing exports since 2000, including automotive products (which were once Canada’s largest export, and have always been especially reliant on U.S. sales). That post-2000 decline in value-added exports resulted in a structural regression of Canada’s economy: export of unprocessed natural resources (especially petroleum) expanded rapidly (described in the next section) as value-added exports shrank. In this context, reducing the relative importance of U.S.-bound exports is not a sufficient goal for Canada’s economic response to Trump’s trade war. Geographical diversification must be accompanied by sectoral diversification: Canada needs to simultaneously support the growth of higher-technology value-added industries (selling output in all markets, domestic and foreign), while reducing overall reliance on the U.S. market.

Diversifying Exports: Sectoral

Figure 2: Primary Products as Share Total Merchandise Exports

Source: Calculations from Innovation, Science and Economic Development Canada, Trade Data Online. Includes Harmonized System product codes HS 01-28 and 71. Get the data Created with Datawrapper

Canada has always struggled to diversity and develop its economy, and become a full-fledged industrialized country – rather than being mostly dependent on the production and export of unprocessed natural resources. Canada’s early development reflected successive waves of ‘staples’ production and export: from fish, furs, and wheat, to minerals, forestry products, and petroleum. This distorted our economy, our infrastructure, and our politics (Stanford, 2008). After the Second World War, Canada worked hard to escape its status as ‘hewer of wood and drawer of water’. By 1999, primary products (in agriculture and resources) accounted for less than one-fifth of total merchandise exports, the lowest ever. That progress was reversed after 2000, however, led by dramatic growth in petroleum exports (especially new bitumen production and export). Now primary and resource products account for half of total merchandise exports, the highest since the 1960s. Dependence on extraction and export of non-renewable resources (especially fossil fuels) carries great economic, geopolitical, and environmental risks. It is no coincidence that the most severe U.S. tariffs have been aimed at manufactured products (like autos, steel, and aluminum): this reflects a deliberate strategy to pigeon-hole Canada as a resource supplier within the North American economy. Strong industrial policy to support manufacturing must thus be central to Canada’s response to Trump’s trade war.

Interprovincial Trade

Figure 3: International and Interprovincial Exports

Calculations from Statistics Canada Table 36-10-0222-01. Get the data Created with Datawrapper

In the early 1980s, Canadian provinces exported as much to each other, as they did to other countries – about 25 per cent of GDP to each.⁵ Globalization changed that balance. After the Canada-U.S. Free Trade Agreement in 1989, and the creation of the World Trade Organization in 1995, exports to other countries surged relative to Canada’s GDP. But interprovincial trade lagged far behind, stagnating since 1990 (at under 20 per cent of GDP). This reflected the gravitational pull of the U.S. market (once more open to Canadian products, but no longer) and the north-south orientation of supply chains and infrastructure. Trump’s restrictions on Canadian exports to the U.S. are a wake-up call for us to once again prioritize and strengthen interprovincial economic ties – such as electricity infrastructure, transportation links, supply chains, and even public services. Finding new opportunities for Canadian businesses to sell their products in other provinces could offset some of the loss of U.S. business. However, strategies to strengthen interprovincial trade must avoid a ‘race to the bottom’ mentality (such as allowing competitive deregulation or automatic mutual recognition of standards between provinces), to make sure interprovincial trade enhances (rather than undermines) quality, safety, and fairness (Trew and Lee, 2025).

Foreign Investment

Figure 4: Canada Net International Investment Position

Source: Calculations from Statistics Canada Table 36-10-0485-01. Get the data Created with Datawrapper

Foreign investment patterns have changed dramatically since Canada’s first free trade agreement with the U.S. in 1989. Canada traditionally relied on incoming foreign capital to develop key industries; concerns over undue influence resulting from foreign ownership motivated previous efforts to define a more independent economic policy. In recent decades, however, the net flow of foreign investment changed direction. In 1990, Canada’s net foreign investment debt equaled 40 per cent of GDP (less than half of which originated in the U.S.) By 2015 Canada became a net creditor in international investment, and that net surplus has widened dramatically since. By 2025 Canada’s net foreign investment surplus reached 60 per cent of GDP (or $1.8 trillion), most of which is placed in the U.S. The huge flow of capital from Canada to the U.S. since 2015 has taken multiple forms: direct investment by Canadian companies, portfolio investment, bonds, and pension fund holdings – including by the Canada Pension Plan Investment Board, which has now invested almost half of its total assets in the U.S. (CPP Investments, 2025, p. 125). Enormous capital holdings in the U.S. tie us closely to U.S. policies. Ironically, they have also helped finance chronic U.S. trade deficits (the supposed justification for Trump’s tariffs). Foreign ownership and control in Canada is still a major concern – especially in strategic sectors, like energy. But now another foreign investment challenge faces Canada: repatriating our own capital to help strengthen our domestic economy in the face of Trump’s threats.

Unemployment and Underutilization

Figure 5: Canada Unemployment Rate

Source: Statistics Canada Table 14-10-0287-01. Get the data Created with Datawrapper

After spiking to 14 per cent during COVID lockdowns, Canadian unemployment fell to historic lows during the initial post-pandemic recovery – falling briefly below five per cent in 2022. But then an exaggerated anti-inflation response from the Bank of Canada slammed the brakes on the job market. Growth slowed, and the unemployment rate crept steadily upward. Unemployment now hovers around seven per cent, made worse by job losses and uncertainty from Donald Trump’s trade attacks. Worse yet, the official unemployment rate does not tell the full story of labour underutilization in Canada. Underutilization is exacerbated by very high youth unemployment (currently around 15 per cent), involuntary part-time work, and suppressed labour force participation. Stimulating domestic spending power, and putting Canadians back to work, must be the overarching goal of Canada’s response to Trump. This requires a coordinated full-employment strategy, that should include: a more balanced monetary policy (targeting employment as much as inflation), expansive fiscal and public investment policies (to stimulate purchasing power and direct and indirect job-creation), active industrial policy to nurture innovative value-added industries, support for the non-traded economy (including housing and human services), and active labour market policies to boost labour force participation and ensure that all communities share the gains of economic growth. Keeping Canadians working is the key ingredient to protecting our economy against Trump’s attacks.

Business Capital Spending

Figure 6: Business Capital Spending on Machinery & Equipment as Share of GDP

Source: Calculations from Statistics Canada Table 36-10-0104-01. Get the data Created with Datawrapper

Business investment is a critical leading indicator for economic growth, innovation, and export performance. Unfortunately, private sector capital spending has been flagging in Canada for decades. Investment weakness is most severe in machinery and equipment, which is the most important determinant of productivity growth and adoption of new technologies. During the expansive postwar decades, when Canada’s industrial and productivity performance was converging with the U.S., businesses invested about six per cent of GDP in machinery and equipment. Since 2000, this has fallen by half – now equaling just three per cent of GDP. This steep drop in business capital spending occurred despite (or perhaps because of) historic cuts in federal and provincial corporate income tax rates, that began in 2001. Further corporate tax cuts are thus not a credible solution to this persistent weakness in capital spending. Alternative measures, such as active industrial strategies, pay-to-play fiscal incentives (such as investment tax credits or accelerated depreciation for strategic projects or assets), preferential access to capital for growing businesses and targeted sectors (such as a national investment fund or more domestic investment by Canadian pension funds), and more expansive macroeconomic policies (to sustain aggregate demand, crucial for investment decisions) hold more potential for resuscitating private sector capital spending. Public participation in capital projects (such as joint-venture equity stakes) can also contribute to stronger investment performance.

Innovation and Technology

Figure 7: Business Expenditure on Research and Development as Share GDP, 2021

Source: Source: OECD Data Explorer, Main Science and Technology Indicators Get the data Created with Datawrapper

Canada’s relatively underdeveloped high-technology industries have hampered our ability to produce and sell value-added products in demand in world markets. Canada provides relatively generous tax incentives for private R&D, and our public institutions (universities and other research agencies) are also relatively well-supported. However, Canada’s record in undertaking more focused, ‘mission-oriented’ research projects, including through direct public participation in commercial development programs (an approach used by high-tech leaders like Korea), is less successful. Despite generous tax incentives, Canadian businesses invest less than half as much in new R&D (barely one per cent of GDP) as the OECD average. Canada’s innovation underperformance has worsened since the turn of the century, as less technology-intensive sectors (such as resource extraction, finance, and real estate) came to dominate our economic trajectory. Our tech clusters produce many small start-ups, some of which become successful – but all too often then sell out to deep-pocketed foreign buyers (mostly in the U.S.). Canada needs to build more home-grown but globally successful high-tech businesses. A more successful technology ecosystem in Canada would combine public research, more targeted private incentives, strong industrial and export strategies, and ongoing training of highly-skilled workers.

Productivity

Figure 8: Average Annual Growth, Labour Productivity, Business Sector

Source: Source: Calculations from CANSIM V720290, Statistics Canada Table 36-10-0206-01. Get the data Created with Datawrapper

Labour productivity measures the average value-added produced by an hour of work across the economy. Faster productivity growth can enhance the total output of an economy, creating more space for higher wages, shorter working hours, and/or more public services. However, there is never any guarantee that higher productivity automatically ‘trickles down’ into broader economic well-being, without pro-active policies to share that wealth through inclusive labour and social policies. Productivity grew rapidly in Canada during the initial postwar decades, as our economy industrialized and workers acquired more skills and education. By the 1980s Canada had largely closed its historic productivity gap with the U.S. (reaching 90 per cent of U.S. levels). Advocates of the 1989 Free Trade Agreement claimed continental integration would eliminate the remaining gap, but in fact the opposite occurred: the decline of higher-tech industries under free trade, years of fiscal austerity, and renewed resource-dependence all suppressed Canadian productivity progress (which has now fallen to around 70 per cent of U.S. levels). In Canada, like most industrial countries, the COVID pandemic further weakened normal productivity patterns. Stronger business investment in machinery and innovation, revitalized industrial policy, improved public infrastructure (in communications and transportation), and stronger macroeconomic conditions (to achieve lower unemployment and higher capacity utilization) will all be essential for accelerating productivity growth in Canada.

Public Investment and Infrastructure

Figure 9: Public fixed capital spending as share of GDP

Source: Calculations from Statistics Canada, Table 36-10-0104-01. Get the data Created with Datawrapper

Many government initiatives to strengthen Canada’s economy in the face of Trump’s attacks will require large public investments in infrastructure of all kinds: transportation, non-market housing, electricity generation and transmission, other renewable energy facilities, northern development, health care and education facilities, and more. Public equity financing could also help capitalize productive enterprises, including new Crown corporations in fields such as housing or renewable energy. Strong public investment generates a myriad of spin-off economic benefits: including job-creation (both direct construction jobs, and indirect jobs in supply chain and downstream consumer industries), productivity growth (thanks to better transportation and communication), and regional development. Through the 1990s and 2000s, public capital spending was suppressed by short-sighted fiscal austerity. Public investment fell from five per cent of GDP in the fast-growing postwar era, to three per cent or even lower. This produced an infrastructure debt, visible in deteriorating quality of the public capital stock, that still holds back the economy. Since 2010 public investment has regained some lost ground (recently averaging around four per cent of GDP). But more is required to support the massive nation-building investments needed for a more independent and resilient Canada. Since infrastructure investment creates long-lived public assets, they do not directly contribute to government deficits – making knee-jerk concerns about balanced budgets even less relevant to government capital spending.

The Domestic (Non-Traded) Economy

Figure 10: Traded and Non-Traded GDP, 2013-2022

Source: Source: Calculations from Statistics Canada Tables 12-10-0100-01 and 36-10-0104-01. Get the data Created with Datawrapper

Donald Trump’s trade war has threatened the well-being of Canada’s export industries, which play an important role in the overall economy. However, the economic response to Trump’s attacks cannot limit its scope to supporting those export sectors. Despite the importance of exports, the large majority of Canada’s economic output is produced and consumed right here, and never crosses a national border. Surprisingly, the share of exports in total Canadian GDP has declined since 2000, despite globalization: currently the gross value of exports is equivalent to about one-third of GDP (down from 45 per cent in 2000). Moreover, almost one third of that gross value reflects imported content (such as parts and materials) built into those exports. On a net (or value-added) basis, exports make up less than one-quarter of GDP. The rest (78 per cent of GDP over the past decade) was produced by non-traded industries: including domestically oriented resource and manufacturing, construction, most private services, and almost all public services. Sustaining aggregate demand and employment in the non-traded economy (including the public sector) is all the more important when export industries are under pressure (McQuaig, 2025). Strategies in this regard include promoting more demand for made-in-Canada products and services (including through interprovincial trade), major investments in non-traded capital assets (like infrastructure and housing), and stable funding for public services.

The Care Economy

Figure 11: Employment by Sector, 2024

Source: Source: Yalnizyan (forthcoming) from Statistics Canada Table 14-10-0023-01. Get the data Created with Datawrapper

One critical element of the non-traded economy often overlooked in discussions of ‘industrial policy’ and nation-building is the care economy (Armstrong et al., 2025). The care economy is defined as “the entire range of health and education services, including child- and elder-care,” along with other social infrastructure (Care Economy Team, 2021). It collectively constitutes the largest industry in Canada, employing over 4 million people in broader health care, social services, and education alone. Output of the care economy is mostly produced and consumed within Canada, and hence is one step removed from the impact of Trump’s tariffs and other global pressures. However, commitments made by Canada in international agreements can affect the care economy by opening up service provision to for-profit business models. Privatization, the growth of private equity, and other profit-driven trends in care provision pose major risks to the quality and accessibility of care, working conditions for care economy workers, and the fiscal stability of public services. The stability of the care economy is also jeopardized by the risk of future fiscal austerity from the federal and some provincial governments; austerity may become more aggressive amidst the aftermath of Trump’s tariffs and resulting economic turbulence. Women constitute most of the care economy’s workforce, and preserving good jobs in care work is essential to better gender equality in the labour market.

Greenhouse Gas Emissions

Figure 12: National GHG emissions

Source: Calculations from Environment and Climate Change Canada (2025). Get the data Created with Datawrapper

Canada has made firm commitments to reduce national greenhouse gas emissions as part of the international Paris Agreement process. Those commitments include joining over 100 other countries to achieve net-zero emissions status by 2050, and an interim pledge to reduce emissions by 45-50 per cent below 2005 levels by 2035. As of 2023 (most recent data), Canadian emissions were 696 MT of CO² equivalent – just 8.6 per cent below 2005 levels. To meet the interim 2035 target, annual emissions will need to decline by about 300 MT. That implies a reduction 4 to 5 times larger in the next decade, than was achieved in the last two decades. Measures implemented or being implemented under Canada’s Emissions Reduction Plan will reduce emissions by just a fraction of that amount (Canadian Climate Institute, 2025). Obviously, Canada’s emissions reduction effort needs to be dramatically strengthened and accelerated, and this overarching priority must be reflected within Canada’s overall economic response to Donald Trump’s policies. Fossil fuel interests hope that the fear and uncertainty facing Canadians at this moment will allow climate commitments to be downgraded as an economic priority. This would be short-sighted and dangerous: the uncertainty and economic damage caused by climate change poses an increasing challenge to the living standards of residents of Canada and all other countries. Well-tailoured policies can achieve emissions reduction while also boosting investment, growth, and job-creation in Canada.

Renewable Energy

Figure 13: Fossil fuel electricity generation

Source: Calculations from Canadian Energy Regulator (2023) and Statistics Canada Table 25-10-0015-01. Get the data Created with Datawrapper

One of the least costly means of reducing greenhouse gas emissions is through conversion of electricity generation away from fossil fuel combustion (coal, natural gas, and oil) in favour of non-emitting and renewable sources – including hydroelectric power, solar, wind, and geothermal. Meanwhile, the electrification of other economic activities (such as transportation, heating, and industrial uses) will require new generation capacity. Construction of new generation and transmission facilities as part of the energy transition holds enormous potential to boost job-creation and GDP growth in all regions of Canada (Thomas and Green, 2022). A stronger east-west interprovincial transmission grid will be a key component of this transition, allowing for interprovincial coordination of electricity supplies and helping stabilize fluctuations in renewable energy sources (Mertins-Kirkwood, 2025). Earlier in this century, Canada made substantial progress decarbonizing electricity – thanks to the closure of coal-fired generation facilities in Ontario and Alberta, and rapid growth in wind and solar power generation. In the last five years, however, this progress has stalled, and the share of fossil fuels (particularly natural gas) in total electricity generation has been rising again. Recommitting to decarbonization of electricity generation, and investing massively in renewable energy generation and transmission facilities, must play a vital role in Canada’s nation-building response to Trump.

Housing

Figure 14: Housing starts

Source: Canadian Mortgage and Housing Corporation, Housing Market Information Portal. Get the data Created with Datawrapper

Escalating housing costs – for home purchases, mortgages, and rents – have been the biggest single contributor to higher living expenses, and a source of growing anxiety and anger among Canadians. The Liberal Party made significant housing affordability promises in the 2025 federal election, including innovative proposals to expand financing for low- and middle-income housing, restore incentives for construction of rental units, and create a new federal housing developer (Build Canada Homes) to build on public lands. The overall target is to accelerate new construction to 500,000 starts per year. That would imply a doubling of housing construction from current rates, and if achieved would generate enormous opportunities for new employment and GDP. Construction is a mostly non-traded industry, and hence is relatively insulated from turbulence in international trade. However, Canada’s past reliance on marketized and speculative business models for housing undermines prospects for resolving the affordability crisis. Private developers and financiers prioritize the most profitable housing segments (such as high-end or investment properties), and are subject to repeated boom-and-bust cycles. A shift toward non-market housing supply will be essential to ensure that new construction is steady, and translates into true improvements in affordability (Lee, 2025). A national housing strategy would thus be a crucial element in Canada’s response to Trump. Meeting the 500,000 starts target will require top-priority attention and financial support.

Fiscal Capacity

Figure 15: Federal revenue and accumulated deficit

Source: Finance Canada, Fiscal Reference Tables. Get the data Created with Datawrapper

As Canada’s economy adjusts to Trump’s attacks on export industries, government and the public sector will need to play a more ambitious, hands-on role: supporting investment, innovation, and employment. Public support for investments in infrastructure, housing, and renewable energy will be critical for sustaining economic growth and job-creation in the face of tariffs and uncertainty. Targeted supports for export industries to survive the trade war and reorient sales away from the U.S. are needed – including income supports for displaced workers. Continued public and human services are more important than ever, both to support living standards and as a bulwark against downturn in export sectors. All this will require ample fiscal injections. Hawkish commentators express alarm about deficits and debt, but these concerns are misplaced. Large deficits during the worst of the COVID pandemic were quickly eliminated; the corresponding one-time jump in public indebtedness as a share of GDP has been arrested and partially reversed. Debt is lower relative to GDP than in the 1980s and 1990s, and lower than most industrial countries – and the debt ratio will keep falling so long as the economy keeps growing. Government revenues, however, are also lower relative to GDP than before 2000. It will be essential for government to preserve its revenue capacity, and likely modestly expand it (with measures like closing tax loopholes for investors and high-income households), to collect sufficient resources for an ambitious nation-building economic strategy.

Conclusion: A Holistic Strategy for a Stronger Canada

This Factbook has reviewed fifteen indicators of the varied economic challenges facing Canada in the face of U.S. President Donald Trump’s aggressive attacks on our exports, our industrial capacities, and our very sovereignty. Canada’s vulnerability to Trump’s policies has been exacerbated by past policies which reinforced a structurally subservient role within the North American economy. They pigeon-holed Canada as a supplier of resources, and a ready market for more advanced U.S.-produced products and services. Canada’s response to Trump, therefore, must take account of that structural vulnerability, and undertake an ambitious and holistic strategy to build a more diversified, self-reliant, and ultimately sovereign economy. We need to maximize the full potential of our resources, our people, our knowledge, and our social capital.

A broader appreciation of the structural challenges facing Canada at this historic moment will be critical as our federal and provincial governments design their response to Trump’s attacks. They must resist calls from vested interests for favours or concessions that business has dreamed of for decades: like corporate tax cuts, deregulation, fiscal austerity, and doubling down on fossil fuel exports. These actions would not address the multiple challenges which make Canada so vulnerable to Trump; they would ultimately leave Canada’s economy still structurally underdeveloped and vulnerable to further global instability (economic, geopolitical, and climatic).

The Elbows Up Economic Summit will gather leading progressive economic and policy thinkers to consider all of these dimensions of Canada’s current predicament, and start to assemble and advance a vision for Canada’s post-Trump economy that truly meets the nation-building challenges of this moment.

Notes

See Stanford (2025) for several reasons why signing a bad deal with Donald Trump would be worse for Canada than no deal at all.
Measured in gross terms, not adjusting for the import content of exports; see discussion below.
For example, see Tulloch (2025) or Anderson (2025).
The full list of co-sponsors includes: Canadian Centre for Policy Alternatives, Centre for Future Work, Progressive Economics Forum, Pledge for Canada, Council of Canadians, C40 Centre for City Climate Policy and Economy, the Care Economy Team, and Elbows Up for Climate.
These figures are gross exports, including the value of inputs imported from other countries or provinces; they thus overstate the true importance of exports (as discussed further below).

References

Anderson, Drew (2025). “Alberta vows diplomacy with U.S. — and threatens ‘unprecedented national unity crisis’ in Canada,” The Narwhal, March 25, https://thenarwhal.ca/alberta-trump-appeasement/.

Armstrong, Pat, Marjorie Griffin Cohen, Laurell Ritchie, and Armine Yalnizyan (2025). “Carney’s new nation-building plan lacks a vision for our social, educational and health needs,” Toronto Star, June 5, https://www.thestar.com/opinion/contributors/carneys-new-nation-building-plan-lacks-a-vision-for-our-social-educational-and-health-needs/article_12b40112-bff9-43d2-9f1f-c78b346b9897.html.

Canadian Climate Institute (2025). “440 Pathways Tracker” (Toronto: Canadian Climate Institute), https://dashboard.440megatonnes.ca/.

Canadian Energy Regulator (2023). Canada’s Energy Future 2023: Energy Supply and Demand Projections to 2050, Data Appendices (Ottawa: Canadian Energy Regulator), https://apps.cer-rec.gc.ca/ftrppndc/dflt.aspx?GoCTemplateCulture=en-CA.

Care Economy Team (2021). “The Care Economy Statement,” https://thecareeconomy.ca/statement/.

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Mertins-Kirkwood, Hadrian (2025). “An east-west oil pipeline is a trap—Canada needs an east-west electricity grid” (Ottawa: Canadian Centre for Policy Alternatives), February 12, https://www.policyalternatives.ca/news-research/an-east-west-oil-pipeline-is-a-trap-canada-needs-an-east-west-electricity-grid/.

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Stanford, Jim (2025). A Bad Deal with Trump is Worse than No Deal at All (Vancouver: Centre for Future Work), https://centreforfuturework.ca/wp-content/uploads/2025/07/No-Deal-Better-than-Bad-Deal-JULY2025.pdf.

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Yalnizyan, Armine (forthcoming). “The Care Economy and the Private Equity Challenge.”

This report has been co-published by the Canadian Centre for Policy Alternatives and the Centre for Future Work

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