Ottawa: Canada has unveiled a major package of spending and tax measures worth C$142.1 billion over five years, as Prime Minister Mark Carney seeks to strengthen the country's economy, attract investment and reduce its dependence on the United States amid continuing trade tensions with the administration of US President Donald Trump.
The budget, titled Budget 2026: Masters of Our Destiny, was presented in Parliament on Thursday by Finance Minister François-Philippe Champagne. It outlines the government's plans to expand domestic industries, develop new international trade relationships and improve Canada's ability to withstand economic pressure from abroad.
A central part of the strategy is to diversify Canada's trade beyond the United States, its largest trading partner. Carney has set a target of doubling Canadian exports to countries outside the US by 2035, with a greater focus on markets in Europe and Asia.
The government argues that Canada must strengthen its economic position in a changing international environment. Its plans include encouraging businesses to invest locally, improving infrastructure and supporting industries that can compete in international markets.
The budget comes after months of trade tensions between Ottawa and Washington, particularly following Trump's tariffs on Canadian products, including automobiles, steel, aluminium and lumber. These measures have created uncertainty for Canadian businesses and workers, especially in industries closely connected to the US market.
Canada previously suspended trade negotiations with the United States following disagreements over American demands concerning Canadian sovereignty and cultural protections. Carney has argued that the changing trade relationship requires Canada to strengthen its economic position and explore opportunities beyond its traditional markets.
The new budget therefore places considerable emphasis on building a stronger domestic economy while seeking additional trading opportunities abroad. However, the government has not proposed ending Canada's economic relationship with the United States.
Among the major measures is a C$36 billion tax incentive over five years to encourage businesses to invest in equipment, technology and other productive assets. The Productivity Mega Deduction will allow eligible companies to deduct qualifying investments immediately rather than spreading the deductions over several years.
The government expects the measure to encourage business investment, improve productivity and make Canada more attractive to international investors. It also aims to strengthen the country's ability to compete with other major economies.
Another major proposal is the Canada Strong Fund, a planned C$25 billion investment fund intended to support Canadian companies and major national projects. The initiative is designed to encourage investment in the domestic economy and strengthen Canadian ownership of important businesses and assets.
The budget also allocates significant resources to attracting capital and supporting innovation, alongside investments in infrastructure, energy and critical minerals. The government plans to expand electricity capacity and strengthen the country's electricity networks to support industrial development and future energy requirements.
Defence is another important priority. Canada plans to increase support for its domestic defence industry, with a goal of awarding 70 per cent of military contracts to Canadian companies.
The proposals include C$2.3 billion over five years for a drone initiative beginning in 2027 and C$7.6 billion over five years to extend Canada's military deployment in Europe. These are separate commitments aimed at strengthening domestic defence capabilities and supporting Canada's security responsibilities abroad.
The government has also outlined its ambition to meet NATO's defence and security spending target of five per cent of gross domestic product by 2035.
Alongside its investment and defence plans, the government has introduced measures to address household expenses. These include a new grocery rebate expected to benefit approximately 12 million low income Canadians, as well as funding for housing and food affordability programmes.
The budget also identifies artificial intelligence and technological development as important areas for future employment. The government aims to support the creation of approximately 90,000 jobs related to artificial intelligence for young Canadians over five years.
Despite the ambitious spending plans, the budget projects a federal deficit of C$62.3 billion for the 2026 to 2027 fiscal year. This is around C$3 billion lower than the projection made in the government's April 2026 economic update.
However, Canada is not expected to balance its overall budget in the coming years. The government forecasts a deficit of C$62.5 billion in 2027 to 2028, followed by gradually declining deficits in subsequent years.
The government expects economic growth of one per cent in 2026 and 1.7 per cent in 2027, reflecting the challenges facing the economy amid international trade uncertainty and slower business activity.
The government has also brought forward its target for balancing day to day operating spending with revenue to the 2027 to 2028 fiscal year. This does not mean the overall federal budget will be balanced, as the government is still projecting a substantial deficit during that period.
The budget has attracted criticism from opposition politicians and economists. Conservative opposition leader Pierre Poilievre described it as a credit card budget, arguing that continued borrowing would place a financial burden on Canadians.
Some economists have also questioned whether the government should have used more of its additional revenue to reduce the deficit rather than increase spending and introduce tax incentives. The Finance Ministry has defended its financial approach and rejected concerns about the standards used in preparing its accounts.
Carney's economic strategy reflects Canada's effort to respond to changing international trade conditions while protecting domestic industries and creating new opportunities for businesses and workers.
The success of the plan will depend on whether the proposed investments attract sufficient private capital, whether Canadian companies can expand their presence in international markets and whether the country can manage its public finances while maintaining economic growth.
Although the United States is expected to remain Canada's largest trading partner, the government is seeking to ensure that the country's economic future is not overly dependent on a single market.