Justin Trudeau’s economic legacy | Financial Post

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Jordan Gowling and Barbara Shecter

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With his party languishing in the polls and under pressure from his caucus, Prime Minister Justin Trudeau announced on Monday that he was resigning as Liberal leader. The decision means Trudeau’s nine-year tenure as Canada’s 23rd leader — a period marked by trade battles with the United States, a global pandemic and high inflation — will end in the coming months. Though Trudeau used his resignation address to defend his record in fighting for the middle class, growing dissatisfaction with his government’s economic policies was a key factor in his declining political fortunes. Here, the Financial Post looks back at 10 key decisions that will shape Trudeau’s economic legacy, for better or worse.

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Appointing Bill Morneau as finance minister

When Trudeau’s Liberal Party swept to power in 2015, he tapped business leader Bill Morneau to be his first finance minister. The former executive chairman of Morneau Shepell, a human resources firm founded by his family, Morneau was seen as a seasoned executive who could keep Bay Street happy while helping Trudeau sell ideas to support the middle class. Despite some controversy over Morneau’s financial holdings, the pair seemed to be aligned through the start of the pandemic, with Morneau serving as the face of the Trudeau government’s wage supplement and loan programs. But the partnership would soon run aground, in part due to Morneau’s role in the Liberal Party’s WE Charity scandal, for which Morneau was eventually found to have breached the Conflict of Interest Act. Morneau’s resignation in 2020 also exposed behind-the-scenes clashes with the prime minister over fiscal policy and the path of pandemic spending. In his memoir in 2023, Morneau claimed “political points” and public perception won out over sound fiscal policy when it came to federal aid programs. Ultimately, the priorities Bay Street had laid out — business-friendly tax and regulatory reform and decisive action to curb deficits — were never accomplished, and Morneau’s departure raised questions about what, if anything, would anchor government spending going forward.

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Purchasing the TMX pipeline

In 2018, British Columbia and Alberta were in a bitter dispute over the expansion of the Trans Mountain pipeline, which would triple the pipeline’s capacity to 890,000 barrels of crude oil a day from Edmonton to the coast of British Columbia. Facing mounting legal challenges from environmental and Indigenous groups, the Liberal government bought the project for $4.5 billion from Kinder Morgan Inc. after the company threatened to cancel it. Morneau promised at the time it would not involve a big financial hit and that the purchase would be an investment in Canada’s future. But construction suffered many delays and setbacks and the overall cost quickly ballooned, rising to its current estimate of $34.2 billion. In 2024, the project finally came online. While the cost has risen, the value has, too: that includes increased revenue for Canadian oil companies and better access to Asian markets. Getting a pipeline built at all in Canada is no small feat. Whether the financial cost was worth it may not be known until a viable buyer is found to take it off the government’s hands.

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Implementing the carbon tax

As part of his green agenda, Trudeau’s government implemented a national minimum price on carbon pollution starting at $20 per tonne on gasoline in 2019. That price has increased every year and now currently sits at $80 per tonne. The tax quickly became a political headache for the governing party, with the Conservatives vowing to scrap it as inflation soared. Though Trudeau has relentlessly defended the measure as a necessary one in the fight against climate change, he also waffled, announcing in the fall of 2023 a three-year exemption for Canadians who use home heating oil. The move was largely seen as an effort to boost the Liberals’ political fortunes in Atlantic Canada, where many residents use the heating method, and only bolstered concerns that the tax had political motivations on top of environmental ones. The carbon tax will be a wedge issue in any coming election, and could divide Liberals themselves when it comes time to select a new leader.

Expanding government and the debt

Trudeau’s legacy will include the significant expansion of the size of the federal government and of the national debt under his tenure. Part of this was unavoidable: The pandemic years, when lockdowns resulted in a major contraction in the global economy, led to unprecedented fiscal interventions in countries around the world. New programs such as the Canada Emergency Wage Subsidy and the Canada Emergency Business Account were introduced in 2020 and, though designed to help people who lost their jobs and keep businesses afloat, came at huge cost to the federal coffers. Some also argued that while well-intentioned, they went too far, were poorly designed and were ripe for fraud. Overall, the federal debt almost doubled to $1.236 trillion in 2024 from $619.3 billion in 2015. Trudeau’s reign also saw a huge expansion of the federal public service workforce, which increased to 367,772 employees from 257,034.

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Increasing immigration

When Trudeau entered office, Canada’s population stood at 35.8 million people. In 2024, Canada’s population hit 41.4 million, an expansion that accelerated significantly as the economy began to re-open following the lifting of pandemic lockdowns. In 2021, Canada broke the previous record set in 1913, by welcoming more than 401,000 new permanent residents. The following year, Canada surpassed that record, adding another 431,645 new permanent residents. While the government’s initial decision to increase immigration was in part a response to a labour shortage coming out of the pandemic, many began to question the impact the influx was having on an already tight housing market and strained services. As the country slogged through a GDP-per-capita recession, attitudes toward immigration — long a consensus topic — began to sour. In the fall of 2024, following dismal approval ratings, Trudeau and his immigration minister, Marc Miller, announced a 21 per cent cut to permanent resident levels while announcing changes to other programs as well. While any kind of permanent turn against immigration seems unlikely, future governments will have to consider where to draw the line.

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Failing to address the housing crisis

One issue that has plagued Trudeau’s government has been housing affordability. In 2017, the government announced a national housing strategy and funding to tackle homelessness and build 100,000 new affordable homes. But with rising immigration fuelling demand and few concrete solutions in place, meaningful improvements in overall housing supply and affordability have been elusive. Some measures, including the housing accelerator fund, which provided direct funding to municipalities to build more homes, have made incremental progress, but have hardly changed the overall equation. Trudeau’s government was also slow to address concerns about foreign ownership. In 2022, the government passed legislation to implement a two-year ban on foreign investors buying property in Canada. This ban was set to expire at the end of 2024, but was expanded for another two years until January 2027.

Establishing universal childcare

The establishment of a universal $10-per-day childcare program has long been a Liberal goal, and if it survives could be one of Trudeau’s biggest legacies. In 2021, the Liberal government pledged $27.2 billion over five years to fund the program, which would cut the daily cost of childcare to $10 by 2025-26, through bilateral agreements with the provinces. As of 2024, all provinces had signed on. The measure was pitched as not only a social policy, but an economic policy as well, designed to help more women participate in the workforce. The program has faced criticisms, particularly from daycare operators who argue the funding is not enough to cover the cost burdens, but it has widespread support from families. Trudeau also introduced the Canada Child Benefit, a non-taxable amount paid monthly to help families with children under 18. The benefit has been hailed as a success for lifting thousands of children out of poverty, though the cost has been contentious.

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Pursuing free trade

The Trudeau government was no stranger to trade deals. These included USMCA (The United States-Mexico-Canada Agreement), a tensely negotiated pact that replaced the North America Free Trade Agreement. The Liberals notched some wins for Canada, including stronger intellectual property protections, but then-U.S. president Donald Trump’s threats to slap quotas or a 10 per cent tariff on Canadian aluminum dampened enthusiasm for the deal. Now back for a second term, Trump has threatened a blanket 25 per cent tariff on Canadian and Mexican goods and said he is going to “have a lot of fun” reopening the trade talks. During Trudeau’s nine years in power, his government was also instrumental in negotiating the Comprehensive Economic and Trade Agreement with the European Union and its member states, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free trade agreement between Canada and 10 countries in the Indo-Pacific, as well as the United Kingdom.

Betting big on the EV industry

Trudeau’s government has spent billions on the promise of an electric vehicle revolution, funding manufacturing through direct investment and incentives such as tax credits and subsidies. The money for the EV supply chain has come even as critics questioned whether enough EVs could be sold to meet a pledge to get gas-fuelled cars and passenger trucks off the road by 2035. The Liberals’ commitments represent the largest influx of investment into Canada’s auto sector in at least a generation, and will make for one of Trudeau’s biggest economic legacies — provided everything works out. And there have been setbacks: Lower-than-expected demand for electric vehicles has been cited for production delays by Ford Motor Co. and General Motors Co., while Sweden’s Northvolt AB, which plans to build a battery-cell factory near Montreal, announced a strategic review in August. While Trudeau billed these as mere bumps in the road to the EV future, it’s too soon to tell how significant the impact will be.

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Falling out with Chrystia Freeland

The bombshell resignation of Trudeau’s closest ally and second finance minister, Chrystia Freeland, will be remembered as the tipping point that ended his run as prime minister. Her resignation came just hours before she was set to table the government’s fall economic update. If her resignation letter is taken at face value, the root cause of the falling out, as with her predecessor, Bill Morneau, was the federal government’s fiscal spending. She outlined the need to keep the country’s “fiscal powder dry” given the threat of tariffs by the incoming Trump administration. The fall economic statement revealed a nearly $62-billion deficit, blowing past the fiscal guardrail Freeland had set the year before. When asked about whether Freeland’s resignation was the catalyst that led to his resignation, Trudeau told reporters: “I had really hoped that she would agree to continue as my deputy prime minister and take on one of the most important files that not just this government, but this country is facing, but she chose otherwise.”

—with files from Gabriel Friedman

• Email: bshecter@nationalpost.com

• Email: jgowling@postmedia.com

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