Budget won’t contain specific actions to address Trump uncertainty

Finance Minister Bill Morneau will deliver the Liberal government’s second budget on March 22 at a time when Ottawa, the Bank of Canada and the business community scramble to gauge the unpredictable policy direction from what is by far the country’s top trading partner.

There are widespread concerns on this side of the border that U.S. policies under discussion — including possible changes in trade and taxes — could have major economic consequences for Canada.

For weeks, if not months, Morneau had cautiously stepped around questions about whether his budget would include some kind of response or risk adjustment to the Trump-related uncertainty.

This week, however, he sounded more assured as he fielded queries from reporters about it.

“Our budget will be about Canada,” Morneau said Tuesday shortly after announcing the budget date during question period. “It’ll be about Canadians, and I’m confident that we’ll help Canadians get the skills they need in a challenging economic environment.”

Last week, Morneau’s quest for clarity on Trump’s agenda and relationship-building with the administration took him back to Washington, D.C., where he met for the first time with his counterpart, Treasury Secretary Steve Mnuchin.

In February, Morneau also had face-to-face talks with senior White House economic advisors Gary Cohn, Kenneth Juster and Dina Powell as well as Sen. Orrin Hatch, chairman of the finance committee, and Sen. Mike Crapo, chairman of the banking, housing and urban affairs committee.

Canada’s Trump-related economic fears are linked to potential changes such as a border adjustment tax, protectionist policies, a renegotiated North American Free Trade Agreement and corporate and personal tax reductions, which some have warned could kneecap Canadian competitiveness.

Ottawa, however, likely has time to assess the situation because it’s still too early to know fate of many U.S. proposals.

For example, U.S. Commerce Secretary Wilbur Ross told Bloomberg this week that NAFTA negotiations will probably only start in late-2017 and could last about a year.

Read: NAFTA will see big changes: U.S. commerce secretary

But even though the budget won’t contain specific measures to address the U.S. unknowns, Ottawa will continue to engage with Washington to avoid surprises and will closely monitor any signals of change, said a source who declined to be identified because he was not authorized to speak publicly about the topic.

In recent weeks, the Trudeau government has faced pressure from political rivals to use the budget as a tool to help inoculate the Canadian economy from potential U.S. threats, even if Trump’s economic road map has yet to materialize.

“My biggest concern is that we are going to make it a lot easier for President Trump to steal jobs out of Canada, and we’re going to continue to press Prime Minister Trudeau leading up to the budget to rethink his economic agenda,” interim Conservative leader Rona Ambrose told reporters last month following Trudeau’s first in-person meeting with Trump.

“He knows Mr. Trump will be doing everything he can to aggressively make energy cheaper, make taxes lower and encourage people to hire and create more opportunities south of the border — what is Mr. Trudeau going to do in response to that?”

Ambrose has been critical of the Liberals for introducing policies that she argues are piling up costs for businesses. For example, the Tories have regularly warned that the Liberal carbon-pricing plans will make energy more expensive, while the government’s push for the Canada Pension Plan expansion will add costs for companies in the form of “payroll taxes.”