Following Canada’s recent election, the country’s economic prospects have improved since earlier this year when the introduction of U.S. tariffs clouded the outlook. While the policies U.S. President Donald Trump are largely seen as a key influence on the outcome of the election, the impact extends well beyond the cross-border relationship. Interprovincial trade barriers are coming down, Canada is actively working to diversify its trade away from the U.S., fast-tracking infrastructure projects – with an emphasis on energy and mining – and repairing international relationships. 

To understand these trends and the potential investment opportunities, BMO hosted a panel discussion titled “What’s Next for Canada? Policy, Economic and Energy Impacts of a New Government.” The conversation featured:  

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  Honorable Scott Brison, P.C., Vice Chair, BMO Wealth Management 

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  Michael Gregory, Deputy Chief Economist, BMO Capital Markets 

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  Randy Ollenberger, Managing Director, Oil & Gas, BMO Capital Markets 

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  Devin Dodge, Industrials Analyst, BMO Capital Markets 

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  George Trapkov, Vice President, Portfolio Manager, BMO Private Wealth (moderator) 

“Politics changed in Canada as a result of the Trump administration,” said Scott Brison. “The tariff threat to the Canadian economy really did create a seismic shift in how Canadians were viewing politics at the time of the election. 

Canadians want a leader who can not only manage the economy but also build a more resilient one – one that can thrive while remaining less vulnerable to external threats, said Brison. “In response to the shifting policy stance in the U.S., one of the main questions on the ballot for Canadians in the recent federal election was who could best deal with Trump and the tariff threat,” explained Brison. 

“Although it’s still early, Canadians seem to be getting what they voted for,” said Brison noting the relationship between Canada and the U.S. has improved dramatically.  

For more timely insights on international trade and tariffs, visit the BMO Cross-Border Perspectives hub.   

“From an economic perspective, Canada is performing much better than expected since the initial announcement of U.S. tariffs,” said Michael Gregory. Currently, BMO Economics is projecting that real GDP growth will be 1.3% through 2026, which stands in sharp contrast to the 0.5% pace expected in April. Still, that growth is below the near 2.0% BMO forecast for Canada before the trade disruptions started. There are two key reasons for the improved economic outlook: the tariffs haven’t been as onerous as feared and Carney’s pro-growth policies.  

“The bigger challenge is the uncertainty created by U.S. trade policy and the impact it’s having on business and consumer confidence,” said Gregory. “Confidence continues to erode and that is spilling over into trade  related business investments,” he said. “We’re unlikely to see that investment perk up or our confidence show signs of being restored until we clear up this uncertainty about trade policy.” 

A trade deal between Canada and the U.S. could go a long way to resolving that issue, but Gregory said it’s going to take time to regain that confidence.   

“North-South relations isn’t the only focus of the federal government; Carney has also expressed a desire to transform Canada into an energy superpower. The industry is very hopeful that this policy shift will help create some additional LNG (liquefied natural gas) facilities off British Columbia to complement the facility that is just starting up,” said Randy Ollenberger.  

“The reception in the oil patch has been very cautiously optimistic,” he said. “What the industry is looking for is a lot of certainty around the regulatory environment and costs. A big part of that revolves around the government’s desire to sell the world low-carbon barrels while striving to live up to the country’s energy ambitions, he explained. Many of the carbon capture projects have been on hold because of political uncertainty.” 

Devin Dodge agreed that the environment for large projects, like LNG, has improved. He also added that there’s more to Carney’s vision than fossil fuels, noting that renewables and low and carbon-free energy sources, such as hydro, offshore wind and nuclear, are part of the plan.  

“There’s still a lot of things where the industry needs clarity on, but if we continue to move forward down this path where the government wants to see these things done, where it’s encouraging the industry, encouraging project sponsors, to move forward and creating the necessary conditions, we could be looking at an environment where you see several hundred billions of dollars of incremental investment made in Western Canada over the next five years,” he said.  

“Two years – that’s the target the federal government has set to approve some of its more ambitious resource and infrastructure projects,” explained Dodge. He anticipates that the project list could include non-conventional infrastructure investments in Indigenous communities, as well as in Northern Canada, particularly around ports and access routes to those ports. “East-West electricity transmission could be another project to watch, with the easing of interprovincial trade barriers,” he said.  

“That’s a big improvement from the current state, at least when we think about resource and energy projects,” Dodge said. “But those project schedules may not have shovels in the ground until 2027 or 2028.” 

“Still, that timeline could benefit engineering consultancies and heavy equipment dealers and construction companies,” he said, although which companies within those industries will depend on the projects that come forward.  

Just weeks after winning the federal election, Prime Minister Mark Carney has hosted a meeting of the G7 countries, introduced policies to speed up major projects and is meeting with leaders in Europe and rebooting relationships with countries such as India, Saudi Arabia, and China. 

Domestically, Carney is also leveraging the strong nationalist sentiment within Canada to expedite the approval of major projects and help transform Canada into an energy superpower, both in conventional and clean energy. “One thing President Trump has achieved is the uniting of Canadians to an extent I've not seen in a long time around the need for economic growth, and things like major projects and uniting provinces around interprovincial trade,” said Brison. Even Quebec, which may not have been as receptive to the national energy project, is more receptive to the idea, he said.  

“This is a honeymoon period still, and people want the candidates to succeed and for the Prime Minister to succeed, but there’s going to be challenges to get there, but early signs are very positive,” said Brison.