Finance Minister Bill Morneau Defends Canada’s Economic Policies, Competitiveness

Finance Minister Bill Morneau was again forced to defend his government’s economic policies and Canada’s competitiveness as he travels across Canada in support of the 2018 federal budget.

The minister was in Vancouver Tuesday to talk about Budget 2018, with $21 billion in new spending and an $18 billion deficit, which he characterized as continuing investments in Canada’s long-term capabilities while the economy is strong.

The crowd at Vancouver’s Fairmont Pacific Rim Hotel, however, was more interested in shorter-term concerns such as American tax changes and the competitiveness of Canada’s economy. Specifically, Minister Morneau was pressed on why the government didn’t respond in his budget to big U.S. corporate tax cuts that slashed corporate rates to 21% from 35%.

The Finance Minister said his department is keeping a close eye on how the U.S. implements those cuts, which upon closer analysis don’t appear to be as steep, averaging about 25.8% south of the border compared with Canada’s existing 26.8% corporate tax rate.

“I’m not trivializing the change, because it’s significant,” said Minister Morneau. “But it’s important to point out it’s not (as deep) as people are saying.”

And Minister Morneau said the government hasn’t ruled out making its own tax changes once it has done its homework in examining how U.S. tax changes are enacted.

On a potential trade war with the U.S., Morneau shed no new light on how Canada will eventually react to U.S. tariffs being proposed on its imports of steel and aluminum, although the European Union has laid down its own plan of retaliation.

“We see ourselves as being an important part of the U.S. supply chain (and) an important part of NATO and the U.S. security alliance,” Minister Morneau said. “We’re clearly putting forward the position to the U.S. that we believe Canada should be exempt from tariffs on steel and aluminum.”