Carney’s government unveils a C$142 billion budget to reduce reliance on the US

Prime Minister Mark Carney’s “Masters of Our Destiny” budget provides for C$142.1 billion in spending and tax breaks. The growth forecast for 2026 is just 1%.

Ottawa. The government of Canadian Prime Minister Mark Carney presented a new federal budget on Thursday. The document aims to reduce the country’s dependence on the United States and was prepared at a time when President Donald Trump’s trade war is reshaping economic relations among allies.

The budget, titled “Masters of Our Destiny,” combines multiyear spending and tax breaks worth a total of C$142.1 billion (about US$101.6 billion). The funds are intended to attract investment and to support energy, infrastructure and culture.

Deficit and growth forecast. The government projects spending of C$603 billion and a deficit of C$62.3 billion for fiscal year 2026-27. The deficit is C$3 billion lower than the April forecast. Citing IMF data, the budget states that Canada’s combined federal, provincial and local deficit is 2.5% of GDP. In the United States, the figure is 8.5%.

At the same time, the government expects the trade war to slow economic growth late this year and early next year. The budget forecasts growth of just 1% in 2026 and 1.7% in 2027. The document also states that the US is “upending global trade.”

Investment incentives. The previously announced tax break allows companies to immediately write off the cost of eligible investments. As a result, the effective tax rate on new investment falls to 6.4%, which is less than half the comparable US rate. The measure is estimated to cost the budget C$36 billion over five years.

Sovereign wealth fund. The budget provides for the creation of Canada’s first national sovereign wealth fund. Its capital of C$25 billion (US$17.9 billion) will be directed to Canadian companies and major projects.

Defense. C$7.7 billion (US$5.5 billion) is allocated to strengthen the defense industry. 70% of military contracts will go to Canadian companies. Although the budget does not fully reflect the costs, Ottawa says it is moving toward NATO’s target of spending 5% of GDP on defense and security by 2035.

Political context. Canada withdrew from trade talks with the US in August. Ottawa considered US demands a threat to the country’s sovereignty and cultural protection. The budget was released two days after Democrats won control of Congress in the midterm elections. That result has weakened Trump’s political position, while countries work toward a possible trade deal.

Mark Carney, former head of the Bank of Canada and the Bank of England, aims to strengthen ties with Europe and Asia and to double exports outside the US by 2035.