Mark Carney’s election as prime minister likely paves the way to government efforts to boost the sagging economy—perhaps even a larger stimulus plan than the Liberal Party promised. However, experts observe that the removal of political uncertainty opens the door to arguably the most vital piece of business: renewed engagement with US President Donald Trump.
With trade and Canadian economy at the top of the agenda, Carney is expected to prioritize efforts to ease tariff pressures and secure smoother access for Canadian exports to the US market while exploring new markets further afield.
In what was largely a two-party race, Carney’s Liberals secured the most seats in seven provinces, though they remain underrepresented in Alberta and Saskatchewan, Canada’s two most resource-rich provinces. With 168 seats, the Liberals fell just short of the 172 required for an outright majority. As a result, they will need the support of at least one opposition party to advance its economic policies.
Carney, a two-time central bank governor, now faces a challenging economic landscape marked by sluggish growth, high unemployment, a depreciated Canadian dollar, and rising inflation. Still, analysts agree his most pressing task will be negotiating a favorable trade agreement with US President Trump. Canada was notably excluded from Trump’s recent 90-day tariff suspension, and it remains subject to targeted levies across industries, including automotive and energy.
We have highlights from expert commentary on the election’s implications for Canada’s economy, taken from responses to Morningstar’s requests for comments and analyst notes to clients.
Robert Kavcic, senior economist at BMO
“The Canadian election results are still being finalized, but Mark Carney and the Liberals appear to have secured a strong minority government mandate. Based on the policy measures and dollar amounts outlined in the Liberal platform, the Canadian economy is in for a significant wave of fiscal stimulus. Even after accounting for Canada’s retaliatory tariffs to raise C$20 billion (or 0.6% of GDP)—which can be thought of as a tax increase—the net new stimulus under the Liberal platform is +0.5% of GDP in FY25/26, and averages +0.6% of GDP over the four-year forecast horizon.
“The impact is spread across infrastructure spending, higher defense outlays, tax relief and a general increase in other programs. We have already been assuming a healthy dose of government stimulus since the trade war broke out, so this does not yet necessitate any revision to our economic outlook, at least until we see a full budget.”
Avery Shenfeld, senior economist at CIBC Economics
“While the election was the fourth consecutive win for the Liberals, the change in leadership from Justin Trudeau to Carney will bring with it some notable policy changes, given both the heavy hand that recent PMs have played in setting the government’s course, and the need to respond to a changing economic environment ahead.
“Budget deficits look likely to head higher in the near term, as would typically be the case when an economic shock, in this case from trade frictions, hits revenues and prompts fiscal stimulus measures. Deficits are likely to somewhat exceed what the Liberals suggested during the campaign, while still tracking miles below US federal deficits as a share of GDP.
“The first order of business isn’t a line in the platform, but perhaps of greater importance than anything else on the government’s agenda. A phone call between Carney and President Trump shortly after the former became PM has reportedly set the stage for direct talks over the current trade frictions between the two countries. Hopefully, that meeting won’t be at the back of a long line of national leaders seeking redress with the White House. Unlike others, but on par with Mexico, Canada doesn’t face a 90-day countdown to even higher tariffs if no deal is reached.
“But there is still a lot at stake in getting back to free trade, or something much closer to it, in the auto, steel and aluminum sectors, warding off threatened tariffs on copper and electronics, and preventing a proposed increase in lumber tariffs. Looming further out is a 2026 deadline for extending the USMCA trade pact with the US and Mexico.”
National Bank of Canada team of analysts led by Warren Lovely, managing director
“The vote centered on who was deemed best positioned to deal with an antagonistic US administration. Cost-of-living pressures were likewise top of mind for many voters. Given the severity of the US threat and structural roadblocks to growth, the Liberals ran on a ‘Canada Strong’ plan that involves net new investments (and thus implies larger deficits and more federal debt).
“Carney’s Liberals also favor a new approach to federal budgeting, shifting the focus to an operational budget they aim to balance by year four of their mandate. No explicit debt targets were outlined in the Liberal plan. Regardless, bond investors will be called upon to absorb incremental GoC supply, with non-residents having been a particularly vital source of demand lately.
“But the first most vital piece of business for the prime minister will be a quick re-engagement with the US president on trade and security issues, ultimately with a view to lessening the tariff burden and securing predictable access for Canadian exporters.”
Ben Jang, portfolio manager at Nicola Wealth
“The election victory for Mark Carney was largely expected from polling, however, global election polling has been far from accurate so certainty on the election outcome removes some unknowns.
“The rally around the flag narrative holds true in Canada. A defense mechanism for Canadians as a result of trade tariffs from US. We expect that Prime Minister Carney reacts quickly now that his role is secure with legislation coming soon to strengthen Canada’s economy to protect it from a protracted trade war. We expect the Liberals to lower income tax for lower income Canadiens and support for both renewal and traditional energy sources.
“Likely, the trade war negotiations won’t be resolved anytime soon and Prime Minster Carney’s experience navigating economic crisis should aid him well.”
Tony Stillo, director of Canada economics at Oxford Economics
“The Liberals have proposed an activist fiscal agenda that proposes C$77 billion – 2.5% of 2024 GDP – in new deficit-financed fiscal stimulus over the next four years, focused on increased defense spending, infrastructure projects, and new housing construction alongside personal and corporate tax cuts.
“The Liberal plan would lead to larger deficits in the near term and lessen Canada’s economic downturn from the global trade war, but it likely wouldn’t prevent an outright recession this year. Our modelling suggests the substantial new fiscal stimulus in the Liberal platform would add 0.2 percentage points to GDP growth in 2025 and a further 0.6 percentage points in 2026.
“Still, another minority government means we will have to wait for the government’s spring budget for clarity on the Liberals’ post-election plans. They will need to garner support from the Bloc or NDP, which could mean even larger fiscal stimulus, deeper deficits, or a reorientation of priorities.”
TD Economics’ team of economists, led by Beata Caranci, SVP and chief economist
“Now the big question is who will partner with the new Liberal government to pass legislation? The Liberals and Conservatives have significant alignment in platform objectives to improve Canadian competitiveness, but whether they can vote in alignment would be historically unusual.
“However, a record 84.9% of voting Canadians behind these two parties sent a clear message last night to ‘get along.’ We believe that with only a handful of additional votes needed to pass legislation, the Liberals will likely reach across party lines for support on individual bills.
“Prime Minister Carney’s election platform (effectively a miniature budget) set out nearly C$130 billion in new spending initiatives spread over several important themes, including infrastructure building, defense spending, housing affordability, internal trade and economic development, resource project development, among many others. Despite what seems like a scattershot of policies, the central theme is to pivot Canada towards domestic economic resilience, after relying on a deepening US relationship for 80 years. This suggests a more active role for government in both funding and building than in the past.
“Resource development [plan comprises] permitting timelines, resource development, and the federal role in infrastructure connecting resource deposits to markets were key themes for both major parties. In Canada, the average lead time to bring a mine into operation is 18 years, with some estimates suggesting permitting alone can take about five years.
“Much of Carney’s position on retaliation against US tariffs is already in place. Tariff response [includes] creation of a C$2 billion Strategic Response Fund to support the auto industry, including supply chain diversification and worker upskilling, [as well as] returning tariff revenue to impacted industries.”
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.