Canada Unveils Budget 2026 to Counter U.S. Tariffs

The Government of Canada tabled Budget 2026 on November 5, outlining $151.5 billion in new spending over five years to mitigate the impact of U.S. tariffs and launch an investment supercycle. The plan aims to increase economic sovereignty through a productivity mega deduction, allowing businesses to immediately write off the full cost of eligible capital assets to reduce the marginal effective tax rate from 13% to 6.4%.

To address the trade war initiated by U.S. President Donald Trump, the government has spent $44 billion on tariff-impacted sectors over two years and adjusted counter-tariffs to generate $11.1 billion in revenue. The budget also allocates $2.5 billion to De Havilland Canada for waterbomber production and introduces legislation to accelerate the Alto high-speed rail line between Toronto and Quebec City.

Other major allocations include $50 billion to double electricity grid capacity by 2050, $50 billion for Indigenous reconciliation, and $6 billion over ten years for the Canadian Security Intelligence Service. The government projects a $62.3 billion deficit for 2026-2027, with a goal to balance operating spending by 2027-2028. While Finance Minister François-Philippe Champagne highlighted the long-term benefits of the plan, the Canadian Federation of Independent Business criticized the budget for lacking detailed support for small businesses affected by Section 338 tariffs.