Canada will likely need to run larger deficits in the short term. If there’s ever a good justification for borrowing, rebuilding our national defences would be at the top of the list.
As incoming U.S. President Donald Trump’s ‘nationalist’ Canadian fans (who appear quite eager to sell out Canada to the U.S. rather than defend our sovereignty) cheer his aggressive stance, they are failing to realize that the imposition of a blanket 25% tariff by the United States on Canada will necessitate a ‘big government’ response here at home, along with a more ‘globalist’ Canadian outlook.
To overcome the economic damage of Trump’s tariffs, Canada must rapidly expand its trade with the European Union, India, and other large economies. We must cut taxes and regulations to unleash Canadian corporations, small businesses, and entrepreneurs. We will need to build pipelines across the country to get our oil to markets across the planet, rather than being dependent on the U.S. And so, out of necessity, a post-tariff Canada will be more pro-trade, and more pro-globalization than a pre-tariff Canada.
Further, we will have to undertake significant government-directed spending measures to offset some of the damage from the tariffs.
25% tariffs will be a devastating blow to our economy, inflicted by a nation that we supposedly have a ‘free trade’ deal with. Canada also must impose counter-tariffs to show resolve. Were we to allow ourselves to be hit by tariffs without hitting back, we would send a message of weakness that would invite more economic attacks on our country, and which would bring even more challenges to our sovereignty as a nation. Counter tariffs are also one of the best ways to negotiate the end of the tariffs from the U.S. altogether because they give us leverage. If both Canadian and American consumers become outraged at the economic damage caused by tariffs, both sides can agree to lift the tariffs to align with public opinion. But that would only work if Canada imposes countertariffs.
Of course, this will have a significant economic impact here at home. Our economy will face a massive and damaging blow.
Such a blow will require large government outlays to create jobs and put money in the hands of Canadians. Combined with lower tax revenues due to a tariff-inflicted downturn, budget deficits are likely to expand dramatically.
Were Canada to try and cut our deficits amid a downturn caused by tariffs, we would be making the same mistake many nations made during the Great Depression, when they kept trying to cut spending to balance the budget amid falling tax revenues, only for those spending cuts to cause a deeper downturn, thus further reducing revenues, thus pushing for deeper cuts, and on and on.
Of course, it’s unfortunate that Canada ran budget deficits in good times since that makes the long-term debt burden worse now that we need to borrow in bad times, but we can’t change the past, we can only respond to the present and build for the future.
And when it comes to Canada’s future, it’s abundantly clear that a huge portion of upcoming stimulus spending in response to tariffs should go towards a massive military build-up.
Look at it this way:
Our country has underspent on national defence for decades. That’s decades of lost economic stimulus, lost innovation (military R&D often has many strong civilian benefits down the road), lost contracts for Canadian defence companies, and more.
Most concerning is the loss of our ability to project power on our territory, and our inability to contribute to our alliances in a manner consistent with our commitments.
And now, we’re running out of time. Russia and China are building up for a larger war. Even amid huge losses of men and equipment in Ukraine, the Russian fascist state is turning their economy into a total war economy. Communist China is undertaking the largest military buildup since the Second World War, and they recently unveiled some new advanced aircraft, indicating China may not only be able to mass produce cheap military equipment, but mass produce quality equipment.
While an invasion of Canada by the U.S. is an incredibly remote possibility, there is no denying that we face a very antagonistic U.S. Administration intent on breaking our economy, breaking our will, and ultimately questioning our sovereignty.
What this means is we don’t have a decade to rebuild our military. We need to condense 10-15 years of military renewal into 5 years or less. That means immense federal outlays, much of which will have to be paid for by borrowing.
That’s not what people like to hear, but that’s the truth.
We took the easy path for decades by underfunding the Canadian Armed Forces and betting the world would remain safe enough and stable enough for us to get away with it. We lost that bet, and now we have to pay the price.
The positive angle here is that ‘paying the price’ can provide the job creation and stimulus our economy will need if it’s ravaged by U.S. tariffs.
We will need to start mass producing artillery, work with our European partners like Germany’s Rheinmetall to build tanks here in Canada, build more small arms, ramp up production of armoured vehicles, throw money at the Canadian drone industry to get them to start producing lethal drones, invest in Canadian AI companies to have them start an autonomous weapon industry, and invest in Canadian aerospace companies to produce long-range bombers/patrol aircraft (it wouldn’t be too difficult for a Canadian company – in collaboration with our allies – to design a B-52 equivalent that could be equipped with long-range missiles to act as a standoff ‘bomb truck’).
We also need to start building military bases across our nation – especially in the North, upgrade airbases, upgrade ports, upgrade and expand current army bases, increase pay for CAF personnel, mass-build military housing, upgrade existing military housing, increase social supports for current & future CAF members, launch huge recruitment campaigns, expand the CAF Reserves, expand the Cadets, equip our currently-deployed personnel with the most advanced protection from drones, increase support for our Veterans, and more.
All of this means jobs and investment.
Jobs in construction, jobs in research and development, jobs in training, jobs in the AI sector, jobs in the artillery production sector, jobs producing tanks, jobs producing planes, jobs taking care of our Veterans, jobs staffing large military bases, etc.
And many of those jobs (which should be well-paid) will go to young Canadians who are struggling right now.
So, as Canada faces potential economic disaster from U.S. imposed tariffs, it is essential that we immediately begin a massive military buildup to stimulate our economy and show that we take our national defence and contribution to our allies seriously.
Spencer Fernando
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