The House of Commons returns for the fall sitting next Monday, September 15; the Senate will resume sitting on September 23.
Overview
The Liberals were elected last April on Mark Carney’s presumed ability to negotiate with Donald Trump. The dynamic and ambitious agenda that helped elect Carney and the Liberals last spring also created substantial expectations among the public, provincial governments and sectoral stakeholders for the government to show early tangible results on its specific plans before frustration and impatience begin to set in.
Last week, Jean-Marc Leger, president and CEO of Leger Marketing, told the meeting of federal ministers in Toronto that Canadian public opinion has shifted over the summer, with U.S. tariffs now fourth among top concerns, displaced by inflation, the cost of living and access to affordable housing. Mr. Carney’s suite of announcements on September 5 was intended to acknowledge these shifts in public opinion while reasserting control of the policy frame for the Fall, by addressing issues that had grown more urgent over the summer, such as a necessary rethink of the federal zero-emission vehicle (ZEV) mandate and the provision of needed supports for the Canadian canola, beef and seafood industries, which have been hit hard by tariffs imposed by China. The Liberals are also under increasing pressure to deliver on a long list of priorities: approval of projects of national significance, (see below) the details of the Build Canada Homes program, artificial intelligence, defence spending and procurement, and tougher crime legislation.
In the past two months, the Prime Minister has attracted some criticism over a perceived lack of progress on the ongoing Canada-U.S. trade issues, as well as what some observers saw as the “elbows down” capitulation on the digital services tax (DST) and the withdrawal of Canada’s earlier-announced counter-tariffs against the United States. Others have credited the PM and government for realizing that these two policies had become significant barriers preventing the negotiations towards a new agreement with the U.S. The August 31 U.S. Appeals Court ruling that Trump’s use of the International Emergency Economic Powers Act to impose the reciprocal and fentanyl-related tariffs was unconstitutional has now been appealed by the White House to the Supreme Court. While the Court has promised to expedite the appeal, it is likely to take months to be resolved. As a result, the Canada-U.S. trade talks are now on a slow walk, with Carney and his cabinet doing their best to downplay expectations. As Minister for Canada-U.S. trade Dominic LeBlanc said last week, the emphasis is now on “technical discussions” potentially leading to “a series of smaller deals”.
The federal Budget, currently expected in October, is likely to be the signature policy event of the Fall. Speaking at the Toronto cabinet meeting, Carney called it “a budget of austerity and investment at the same time”. It is expected to reveal a new approach to federal budgeting, initial directions on reductions to the government’s operations spending, as well as efforts to cut “unnecessary red tape” to enhance government efficiency. Finally, many economic observers expect the Budget will reveal a huge federal deficit; in an August report, the C.D. Howe Institute forecast that the deficit could top out at $92 billion.
On the public opinion front, the Carney post-election ”honeymoon” continues, but the Liberal lead has narrowed since June. As of September 7, the polling aggregator 338Canada shows the Liberals ahead of the Conservatives by a margin of 43% to 40%, with the NDP at 8%, the Bloc Quebecois at 7% and the Greens at 1%.
The national economy
In the second quarter of 2025, the impact of the Trump tariffs became more apparent, as Canada’s economy contracted sharply. Statistics Canada reported that exports declined by a massive 26.8% on an annualized basis and that business investment slowed by 10.1%, the worst result since 2016. As a result, GDP contracted by 1.6% (annualized), the first quarterly contraction in seven quarters.
While final domestic demand was up in the second quarter, showing consumer spending up 4.5 per cent compared to the previous year, Canada lost 41,000 jobs, and in August, the economy shed another 66,000 jobs and unemployment jumped to 7.1%. Economists almost universally expect the Bank of Canada to ease the interest rate at its next setting on September 17.
Still to be absorbed are the impacts of the Trump decision to abolish the long-standing de minimus exemption that enabled goods valued at less than $800 to enter the U.S. duty-free, which took effect on August 29. With the exemptions removed, Canadian businesses – largely e-commerce merchants and independent sellers – could see a sharp decline in U.S. customers who don’t want to risk additional fees or face the burden of extra paperwork to receive their items.
Policy developments over the summer
- In July, the three top members of the Prime Minister’s team moved into their positions: Marc-Andre Blanchard as Chief of Staff, David Lametti as Principal Secretary and Michael Sabia as Clerk of the Privy Council, Secretary to the Cabinet and the Prime Minister’s Deputy Minister. PMO and ministers’ offices have continued to fill out their staff rosters.
- Over the summer, the Prime Minister convened three summits with First Nations, Inuit and Metis communities to address Indigenous concerns that Bill C-5 (the Building Canada Act) might override the “free, prior and informed consent” of Indigenous groups in hastening the approvals of major national projects. The summits met with varying success in allaying native groups’ concerns.
- On August 8, the Prime Minister announced pay raises for all Canadian Forces members, ranging from 8% to 20% at a cost of $1.5 billion. The Department of National Defence will also improve financial support for those CAF members who require frequent moves and separation from their families.
- On August 29, the government launched the new Major Projects Office, which will be headquartered in Calgary and headed by Dawn Farrell, an experienced executive in the energy and infrastructure sectors. The mandate of the Office is to advance major nation-building projects in Canada and streamline federal regulatory project approvals. It will also help structure and co-ordinate financing from the private sectors, provincial and territorial partners, and federal government initiatives, including the Canada Infrastructure Bank, the Canada Growth Fund, and the Indigenous Loan Guarantee Program.
- During his August trip to Europe to develop stronger trade and security ties, the Prime Minister announced that the initial “nation-building” infrastructure projects will include the development of Manitoba’s Port of Churchill to support LNG export opportunities and an expansion of the Port of Montreal at Contrecoeur, which is slated to increase the port’s annual capacity by 60 per cent. The PM said that both developments will expand trade opportunities to Europe.
- Reflecting a reporting change announced earlier this year, the Department of National Defence announced on September 2 that the Coast Guard has now been transferred from its previous home at Fisheries and Oceans and integrated into DND. It will remain a Special Operating Entity.
The September 5 announcements
Following are the highlights of the PM’s announcement of initiatives to assist Canada’s “strategic sectors”:
- Workforce support: a reskilling package, sectoral workforce innovation, major adjustments to make Employment Insurance more flexible to help workers displaced by tariffs.
- A $5 billion Strategic Response Fund to support firms hit by tariffs to adapt.
- A new Buy Canadian Fund to ensure that federal procurement buys from Canadian suppliers.
- Immediate liquidity relief for tariff-hit companies through the Business Development Bank of Canada and a Large Enterprise Tariff Loan Facility to provide more flexibility streams.
- Waiving 2026 model year vehicles from the Electrical Vehicle Availability Standard and a 60-day review of the program.
- A biofuel production incentive to help canola and agricultural producers to help sectors hit by tariffs.
- A Regional Tariff Response Initiative to support SMEs across sectors.
The first “nation-building projects”
On September 11, the federal government announced the first five of its promised major infrastructure projects:
- Phase two of LNG Canada in Kitimat, B.C., doubling its production of liquefied natural gas.
- The Darlington New Nuclear Project in Clarington, Ont., which will make small modular reactors.
- Contrecœur Terminal Container Project to expand the Port of Montreal.
- The McIlvenna Bay Foran Copper Mine Project in Saskatchewan.
- The expansion of the Red Chris Mine in northwestern B.C.
The federal announcement also listed six additional projects that are at an earlier stage and require further development:
- Wind West Atlantic Energy, supporting wind power in Atlantic Canada.
- The Alberta-based Pathways Plus carbon capture project.
- An Arctic economic and security corridor.
- Upgrades to the Port of Churchill.
- All-weather road infrastructure in Northern Canada.
- The Alto high-speed rail corridor between Toronto and Quebec City.
Two issues to watch
Interprovincial trade barriers
Through the passage on Bill C-5 in June, the federal government removed all 53 federal exemptions from the Canadian Free Trade Agreement. Throughout 2025, multiple provinces have also entered into a series of bilateral and multilateral agreements to end specific barriers and to mutually recognize each others’ standards, regulations and procedures. Notwithstanding the progress made, expert observers note that many barriers remain in place and that more work is needed to ensure their complete removal. The government will face pressure to show additional progress in removing the barriers.
Canada Post
The financial challenges at Canada Post continue to mount. After the federal government provided a $1 billion bailout in January 2025, the Crown corporation reported that its revenue had fallen by 37% in the second quarter, resulting in a loss of $407 million before taxes.
Canada Post’s traditional operating model no longer works, but the radical structural changes it needs to make are meeting opposition from the Canadian Union of Postal Workers. The federal government has responded to recent strikes by ordering compulsory arbitration. The government faces two difficult choices: whether to support Canada Post’s efforts to modernize, with the potential for additional strikes and bailouts, or to legislate a fundamental restructuring of the Crown corporation.
Canada-US trade and security
The summer saw more posturing than real progress in the negotiations towards an agreement on the trade and security issues between Canada and the United States. On June 29, Canada rescinded the controversial digital services tax (DST) that had angered both the Biden and Trump administrations, “in anticipation of a mutually beneficial comprehensive trade agreement with the United States” by July 21. That deadline was then missed, and on August 1, the next deadline, President Trump levied a additional 35% tariff on Canada but continued to exempt goods that are CUSMA-compliant (around 85% of Canadian exports), meaning that very few Canadian exports were subject to the new levy.
In light of the exemption, President Trump and his officials argued that the three waves of counter-tariffs that Canada had implemented earlier in the year to retaliate against U.S. trade actions were disproportionate. To restart the talks with the U.S., the Prime Minister announced on August 22 that Canada would now “match the United States” by removing all tariffs on goods from the U.S. that are covered by the Canada-U.S.-Mexico Agreement (CUSMA) by September 1. As a result, the Canada-U.S. talks resumed in the final week of August, but the August 31 ruling by the U.S. Appeals Court that Trump’s use of the International Emergency Economic Powers Act to declare a “national emergency” to justify tariffs was unconstitutional will likely delay the negotiations, while the U.S. Supreme Court hears the Administration’s appeal.
October budget preparations
The Carney government’s fiscal strategy is based on three pillars:
- Dividing the federal budget into two new categories – operating costs and capital investments.
- Reducing operating costs to free up the resources for investments necessary to diversify the economy by balancing the operating budget by 2028, estimated to require spending cuts totaling about $15 billion per year.
- “Capping” the size of the federal public service.
In early July, Finance Minister Champagne instructed ministers to report back on their proposals to reduce program spending by 7.5 per cent in 2026-27, followed by 10 per cent in 2027-28 and 15 per cent in 2028-29. This “comprehensive expenditure review” (CER) process is intended to assess whether existing programs are meeting their objectives, are “core to the federal mandate” and do not duplicate the programs of other levels of government. Ministers provided their CER departmental reports on August 29.
The CER has attracted some criticism from such organizations as the C.D. Howe Institute over the review’s limitations on the categories of spending included, excluding such expenditures as transfer payments and transfers to individuals: “To maximize the benefits of expenditure restraint, the scope of the review must be broadened to include all spending, including measures delivered through the tax system.”
Complementing the CER is a cross-departmental review of all regulations to cut “unnecessary red tape” and enhance efficiency. On September 8, the President of the Treasury Board released a series of progress reports identifying nearly 500 ways in which departments are cutting red tape to make themselves more efficient.
The legislative agenda
Bill C-2: An Act respecting certain measures relating to the security of the border between Canada and the United States and respecting other related security matters
Bill C-2 is a direct response to the border issues that President Trump has made a priority. It is omnibus legislation, proposing changes to 14 separate laws. It makes illegal more chemicals used to make illicit drugs, tighten deadlines for refugee applications, gives the Coast Guard a stronger role in surveillance, and increases law enforcement agencies’ ability to access information. This bill also strengthens financial crime enforcement by increasing penalties for money laundering and improving-data sharing between banks and law enforcement agencies.
It has encountered some opposition due to the significant implications for privacy, despite the government’s framing the changes as a necessity. Critics argue that it erodes refugee protections and threatens civil liberties.
Bill C-3: An Act to amend the Citizenship Act (2025)
Bill C-3 would allow expansion of who gets to pass Canadian citizenship to their children, even if the parent and child were born outside Canada. This changes the current limit, known as the “first-generation rule”, which means that Canadians can only pass their citizenship down to children born abroad if they themselves were either born or naturalized in Canada.
It grants automatic citizenship to individuals who were excluded due to the first-generation limit and lays out a new system for the future. For a Canadian born outside of Canada to pass citizenship to a child also born abroad, the parent must show that they’ve lived in Canada for at least three years before the child was born or adopted.
Both of these bills are headed to committee for further study, and for those who watch committees closely, it’s worth noting that their dynamics will likely be different than in the last Parliament. Previously, because of their agreement with the government, NDP members provided the government with a majority on committees. But now, with the NDP holding many fewer seats, that government “working majority” no longer exists, which will make it much more difficult for the government to control committees.
Bail reform
The Prime Minister has recently indicated that the government will introduce a bill addressing bail reform in Fall sitting.
On the political front
The Conservatives
In August, Conservative leader Pierre Poilievre handily won his by-election in Battle River-Crowfoot with more than 80% of the votes and will return to the House this month as Opposition Leader. Already, he is road-testing lines of attack on Carney and the Liberals, focusing on delays in implementing the government agenda. His party has also proposed a draft Sovereignty Act, which would kill the federal Environmental Assessment Act, scrap the West Coast oil tanker ban; remove the industrial carbon tax; eliminate the electric vehicle mandate and reverse the single-use plastics ban. In addition, in late summer, Poilievre called on the government to scrap the Temporary Foreign Workers Program, claiming that it is preventing too many young Canadians from accessing the job market.
Still to be revealed is what efforts he will make to modify his strident style and address the significant trust gap he has with women voters. In addition, the latest Angus Reid national poll found that Poilievre’s personal favourability remains poor, with only 36% view him favourably, while 58% say the opposite.
The NDP
In the wake of the Jagmeet Singh’s resignation on election night, the NDP has kicked off its leadership campaign to replace him. Party members will elect the new leader through a combination of ranked ballots and round-by-round voting at a convention slated for March 27-29, 2026, in Winnipeg.
To be eligible to vote, members must join the party at least 60 days prior to the vote, a change from the previous requirement of 45 days. Candidates will be required to pay an entry fee of $100,000, which will be due in four installments, and must abide by a $1.5 million spending limit.
While there are no declared candidates yet, Edmonton Strathcona MP Heather McPherson is expected to be a candidate, as well as Avi Lewis, grandson of former federal party leader David Lewis and son of former Ontario NDP leader Stephen Lewis. Mr. Lewis is also an associate professor at the University of British Columbia and a filmmaker. Other candidates are expected to join the race.
