Tackling trade tensions with the US and other takeaways from Canada’s budget

For many years, Canada has put off big decisions on infrastructure.

Now, it must do “everything, everywhere, all at once” while facing higher costs and inflation, as former minister Lisa Raitt noted at the recent Enabling Better Infrastructure (EBI) Conference.

This, she said, is what happens without long-term planning – a situation the EBI programme aims to help governments prevent.

Canada’s latest federal budget, attempts to address this, promising transformation for the country during a period of change “not seen since the fall of the Berlin Wall”.

The first budget under Prime Minister Mark Carney, former governor of the Bank of England, it aims to turn global challenges – including supply chain vulnerabilities and trade tensions with the US – into opportunities.

What’s in the budget?

A move towards long-term investments

Over the last 10 years, the federal government has shifted from being reactive to a more systematic and predictable infrastructure investment model.

It now works with provinces and territories on multi-year programmes and acts as a strategic, informed investor, aligning local projects with broader government objectives.

The strategy is present in the budget, with the government saying it will “spend less to invest more”.

It started a “comprehensive” spending review in the summer, with the aim to save C$60 billion over five years.

The budget introduces capital investments of C$280 billion over the same period, with C$115 billion directed at infrastructure.

A new capital budget framework will separate day-to-day spending from long-term investments.

The government is also changing the budget cycle to autumn to support local planning and align with the construction season, enabling better coordination.

Big bets on infrastructure

The budget recognises that Canada must rapidly build large-scale infrastructure to diversify trade, become an “energy superpower”, improve housing affordability, and enhance security.

The infrastructure commitment includes:

• C$54 billion for public infrastructure like water, wastewater, and transit systems;
• C$19 billion for indigenous and municipal (local government) infrastructure;
• C$37 billion for other assets such as health and innovation; and
• C$5 billion for trade and transport infrastructure.

Key infrastructure initiatives

Budget 2025 announces the launch of a new Build Communities Strong Fund, managed by Housing, Infrastructure and Communities Canada (HICC).

The fund will provide C$51 billion over 10 years, followed by C$3 billion per year ongoing, to modernise community infrastructure, create jobs, and attract investment.

Another flagship initiative is the C$5 billion Trade Diversification Corridors Fund. This aims to double non-US exports by investing in new port, airport, and railway infrastructure over seven years.

The budget also allocates C$1 billion over four years for the Arctic Infrastructure Fund, investing in transport projects in the North for both civilian and military use.

These funds are part of Canada’s nation-building vision, which also includes:

• the Major Projects Office to fast-track projects across Canada;
• the Defence Investment Agency to boost defence infrastructure; and
• Build Canada Homes to double housing construction over the next decade.

With a wide housing supply gap, the 2025 budget sets aside C$25 billion over five years for new housing measures.

Becoming a 'clean energy superpower'

On the climate front, the budget proposes strengthening Canada’s leadership in a low-carbon economy.

It unveils Canada’s Climate Competitiveness Strategy, which expands clean economy tax credits, strengthens industrial carbon pricing, clarifies emission regulations, supports critical minerals projects, and more.

Shifting from reliance to resilience

For decades, Canada has relied on the United States for trade and supply chains.

Canada still benefits from low US tariffs. 85% of trade is tariff-free, and Canadian exporters have the lowest average US tariff of any country in the world – though some sectors remain affected.

But changes to global trade, driven by geopolitics, technology, and the low-carbon transition, are creating uncertainty for Canada, holding back investment and growth.

To counter these headwinds, the Canadian government aims to diversify its trading relationships, moving from reliance on a single trading partner.

Political risk analysis was a point that Raitt underlined at the EBI conference – one of her key lessons from working in government.

As the political context can easily shift, understanding these dynamics early is important for infrastructure planning.

From strategy to delivery

While Canada’s investment budget commits to its infrastructure ambitions, as several speakers at the EBI conference noted, the country will now face the challenging part – delivery.

This is one of the most significant additions to the newly updated EBI guidance (Principle 8: connecting strategy to delivery) which argues that delivery can’t be treated as an afterthought. It needs to be built into strategy from the start.

Canada has started taking steps in that direction.