Carney Unveils New Suite of Economic Policies Following Cabinet Planning Forum
Wrapping up the end-of-summer cabinet “planning forum” in Toronto, Prime Minister Carney unveiled a sweeping economic response to US tariffs, announcing a package of new policy initiatives aimed at countering Trump’s trade war against Canada.
While more detail will be unveiled in the coming weeks and in October’s federal budget, here is what we know so far:
Review of the Electric Vehicle Availability Standard (EVAS)
Prime Minister Carney announced that the zero-emission vehicle mandate policy will be reviewed will not apply to 2026 models.
In 2022, Canada announced a mandate that would phase out the availability of new models of internal combustion engine light duty vehicles by 2035. Set to begin in 2026, there has been widespread acknowledgement that Canadian automakers would face significant challenges achieving these targets, at a time when are contending with new tariffs on US exports.
While electric vehicle adoption in Canada continues to grow, it has slowed in recent years. Many consumers who face longer commutes and colder climates have stuck with gas powered and hybrid vehicles while the technology catches up.
The 60-day review is likely to result in a more technology agnostic approach that could include hybrids and plug-in hybids with more flexible timelines.
Strategic Response Fund – $5 billion Strategic Response Fund (SRF)
The Prime Minister announced that the government will create a new $5 billion fund that will invest in projects in sectors impacted by the trade war. This program replaces the Strategic Innovation Fund (SIF), but will continue to support innovation projects as did the SIF, and notes that “existing and potential SIF projects will not be stopped or deprioritized.”
The program is focused entirely on companies adapting to trade uncertainty. It will:
“… seek to maintain industrial capacity by offsetting new market access costs, supporting retooling, and facilitating plans by Canada-based firms to expand or secure new markets. The Strategic Response Fund would have flexibility to fund pre-development and demonstration activities including pre-front-end engineering design and front-end engineering design studies.”
Support for the Agricultural and Biofuel Sectors
The Prime Minister announced that the government will introduce a new biofuel production incentive with over $370 million for domestic producers to address immediate competitiveness challenges. The government will also amend Clean Fuel Regulations to support the domestic biofuels industry, temporarily increase the Advance Payments Program’s interest-free limit to $500,000 for canola advances, and provide increased funding for the AgriMarketing Program to support diversification into new markets of agricultural products.
Canola producers have been significantly impacted by tariffs levied by China against Canada in response to Canadian restrictions placed on Chinese electric vehicles and batteries. The Canadian biofuels sector has also been hit hard by subsidized US producers flooding the Canadian market. The EPA has also recently introduced measures that will make it very difficult for Canadian biodiesel producers to sell their product into the United States.
The Regional Tariff Response Initiative (RTRI)
Carney reannounced the Regional Tariff Response Initiative, employing regional development agencies to direct grants to industries hit particularly hard by the Trump trade war. The government will expand support to SMEs to $1 billion over three years, with flexible terms, and increase new non-repayable contributions to eligible businesses impacted by tariffs across all affected sectors, including agriculture and seafood.
Buy Canadian Policy
Canada is going to strengthen its “Buy Canada” laws when it comes to federal procurements. Proposed reforms will include:
- By November 2025, the Government will introduce new measures to make sure that Canadian suppliers and their products are prioritized in all federal defense and construction spending. The policy will initially cover Canadian steel and softwood lumber and will be sufficiently flexible to allow the Government to adjust the parameters and include additional domestic materials over the following months.
- The government will implement measures that still require local content and purchases from trusted partners when Canadian suppliers are truly unavailable.
- Expand the “Buy Canada” approach to federal funding administered by other levels of government including infrastructure spending, grants, contributions, loans and other federal funding streams.
Workforce Support Measures
The Carney government is anticipating job losses stemming from the trade war with a raft of new measures to support workers.
Of note, they are investing $382 million over five years to creating 3-5 new “Workforce Alliances” to bring together employers, unions and industry groups in sectors including auto, steel, aluminum, energy, critical minerals and advanced manufacturing. They will fund projects via a new Workforce Innovation Fund, tailored to local job markets to help businesses recruit and retain the workforce they need.
Carney announced that the government will introduce a reskilling package worth $450 million via the Labour Market Development Agreements with the provinces to benefit up to 50,000 workers.
The government will also make Employment Insurance more generous via $1.6 billion in new support over 5 years for long-tenured workers seeking similar work.
The government is also launching a new digital jobs and training platform with private-sector partners to connect Canadians more quickly to careers.
Climate Competitiveness Strategy
Carney teased the release of a Climate Competitiveness Strategy, presumably to respond to the incoming EU Carbon Border Adjustment Mechanism (CBAM). Starting in 2026, the EU will require importers of certain types of products to disclose and pay for the embedded emissions. Sectors captured under the CBAM include cement, Iron and steel, fertilisers, electricity and hydrogen.
Carney did not provide any details on what the strategy would entail.
Defence Industrial Strategy
The Prime Minister also teased the release of a Defence Industrial Strategy. Canada has been in talks with the European Union on ramping up cooperation on the production of military hardware and dual use technology and infrastructure. October’s federal budget is expected to allocate tens of billions of dollars toward defence procurement and production.
Taken as a whole, this package of policies amount to a comprehensive preview of Budget 2025. Counsel will be gathering more information on these programs in the coming days and weeks.