Canada Has Fiscal Room To Withstand Tariff War, New Finance Minister Says

Canada’s new finance minister said the government needs to preserve its fiscal ability to support households and businesses if Donald Trump’s tariff threats materialize into an economic shock.

“I’m reassured that the government has the fiscal room if there’s a decision that has to be made to intervene significantly,” Dominic LeBlanc said Wednesday on a political podcast called The Herle Burly.

“I don’t think any responsible government would allow the economy of the country to be permanently scarred by what is the decision of another government,” he told host David Herle.

Leblanc became finance minister Monday after the stunning departure of Chrystia Freeland, who resigned just hours before she was set to deliver an update on the country’s finances.

Still, LeBlanc acknowledged in the interview that the country’s fiscal position “isn’t terrific.”

The fall fiscal update revealed deeper deficits, driven in part by billions in planned tax relief for companies making investments in Canada. The government ran a C$62 billion ($43.2 billion) shortfall last year — a breach of Freeland’s promise to keep it near C$40 billion.

LeBlanc reiterated that Indigenous contingent liabilities — money the government must set aside to pay out potential future legal losses — were the primary reason the fiscal guardrail was broken.

“It’s not that somebody turned on the tap and spent it on something, it’s an accounting legal advice requirement to be transparent about the high risk of future liability,” he said.

LeBlanc said he expected to meet with Bank of Canada Governor Tiff Macklem on Wednesday and hoped to speak to bank executives over the coming days. He also intends to ask other cabinet ministers for their submissions for the 2025 budget he is planning for March or April.

As finance minister, he said he sees himself in the mold of Paul Martin and Jean Chretien, who each held the role before becoming prime minister. Martin oversaw deep spending cuts that eliminated the deficit and brought the country to a surplus in 1998, though LeBlanc pointed to challenging current circumstances.

“We’re in a difficult position coming out of Covid,” LeBlanc said before adding: “There are some economic indicators and metrics that are encouraging.”

Freeland wrote in her public resignation letter on Monday that Prime Minister Justin Trudeau told her the previous Friday that he was removing her from the finance role and offering her a different position. Freeland’s shocking departure has thrown Trudeau’s government into chaos, with a rising number of his Liberal lawmakers calling on him to resign.

While LeBlanc learned about Freeland’s resignation on Monday morning, he said he spoke with her over the weekend. He told her he was sorry to see a resurgent news cycle involving reports that Trudeau wanted to replace her with Brookfield Asset Management Chair Mark Carney.

“I had a sense that she was struggling. She didn’t get into the details. She did not discuss with me the conversation that reportedly she had with the prime minister,” LeBlanc said. “She said to me, ‘Yeah, it’s a tough weekend.’”

In a separate interview with a New Brunswick newspaper, LeBlanc said discussions with Carney about joining the Trudeau government have concluded and he won’t be coming aboard. Media outlets had reported that Trudeau told Freeland last Friday he was replacing her with Carney, who is also chair of Bloomberg Inc.

LeBlanc, the former public safety minister, said in the podcast interview that Trudeau told him he must “maintain a leadership position around security,” because it’s been linked to tariff threats by President-elect Trump.

LeBlanc joined Trudeau at a quickly arranged dinner with Trump at Mar-a-Lago last month. Trump’s pick for commerce secretary, Howard Lutnick, attended the meeting and LeBlanc said they spoke again last week and he hopes to meet with him again over the holidays.

He also said he had a “really good” preliminary conversation with Trump’s border czar, Tom Homan, and walked him through Canada’s new C$1.6 billion border security plan that aims to address Trump’s concerns. It includes a proposal for a North American joint “strike force” to interrupt the fentanyl trade.

Homan went “all in” on the idea of stepping up efforts to jointly manage drugs and illegal migration at the border, Lelanc said. “I hope it removes the argument from the tariff context,” he said. Trump has also tied his threat of 25% tariffs to the US trade deficit with the northern nation.