By Ian Bickis in Toronto
Prime Minister Justin Trudeau’s plan to step down has business experts warning about the heightened uncertainty it has created and the need for a unified front to face the challenges ahead.
Trudeau’s announcement that he will resign once a new Liberal leader is chosen comes just weeks before Donald Trump, who has threatened to impose 25 per cent tariffs on Canadian goods, is sworn in as U.S. president.
The decision has ushered in a new wave of uncertainty, said RSM Canada economist Tu Nguyen.
“Canada’s economic policy uncertainty has surged to the highest in decades,” she said in a note, pointing to a Bloomberg index that aims to measure such uncertainty, which is running around double where it’s hovered in recent decades.
She said the uncertainty could temporarily deter investment flow into Canada, delaying the business recovery that interest rate cuts and easing inflation were expected to spur, and weakening Canada’s bargaining position at a time of tariff threats.
The potential economic hit from tariffs have business groups urging co-operation and unity following Trudeau’s announcement.
Canadian Chamber of Commerce chief executive Candace Laing welcomed Trudeau’s announcement, saying it marks a turning point as the country faces unprecedented domestic and international issues.
“Canada can’t afford inaction with so much at stake. Unity is key: political leaders, businesses, and communities must come together around our common opportunities,” said Laing in a statement.
Business Council of Canada chief executive Goldy Hyder said that while Trudeau’s legacy includes positives, it’s unfortunate that so often the federal government was at odds with the private sector, and there was a lost opportunity to create better conditions for long-term economic growth.
“Now more than ever, we must work together in a spirit of collaboration to help our country succeed.”
There are clearly short-term risks around tariffs and leadership, but overall the announcement is likely to create limited change for business, said Tyler Chamberlin, associate professor at the University of Ottawa’s Telfer School of Management.
“I think it’s just, everything just holds for the time being,” said Chamberlin.
“My suspicion is that the markets and the business community is going to say, well, so we’re still going to have a Pierre Poilievre government.”
Canada must hold a federal election by the fall, and Poilievre’s Conservatives are leading in the polls.
As to tariffs, he notes that a good portion of the discussions happen between bureaucrats, while he thinks the risks of tariffs being inflationary, and a risk to U.S. businesses, will have the most influence on Trump.
“Our prayers, if you’re a praying soul, should be in the next little bit that you would get American business interests leaning enough on Trump himself and the people around him to temper down his aspirations … because it will hurt them in big ways.”
The one certainty the Trudeau announcement brings is that new leadership is coming, but whoever eventually leads the country will have limited levers to pull, said Andreas Schotter, professor of international business at the Ivey Business School.
“There’s very little wiggle room right now to manoeuvre for any new leader.”
Low productivity and economic growth along with numerous new financial commitments mean Canada will be hard-pressed to respond to the U.S. tax cuts coming, even as Canada is already uncompetitive, he said.
He’d like to see new leadership work to improve business policies through reduced regulations and lower taxes, as well as improve relations with trading partners other than the U.S.
“This will take some time, to repair and to structure again our international business competitiveness, and our international business alliances.”
He said that overall, Canada needs to reassess where things stand, go through an election and the clearer mandate he hopes it will bring.
“I think we need to step back, get our house in order, get the Zamboni out, wait until the ice is a little bit more predictable again.”
