Carney bets Canada can live with tariffs to unlock investment

Prime Minister Mark Carney is on the brink of a trade pact with the U.S. His next challenge will be convincing his country that swallowing some tariffs is worth the greater economic certainty that a deal would bring.

So far, the emerging details of a draft agreement between Carney and U.S. President Donald Trump suggest Canada will accept reduced U.S. tariffs on its aluminum, steel and autos, and will remove its own retaliatory levies on those same products.

Carney has said that no deal is better than a bad deal. But the former central banker is now betting that making concessions in return for more stability — even if it means facing persistent U.S. tariffs in some sectors — will help his longer-term goal of attracting more capital to Canada.

SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.

A welcome email is on its way. If you don't see it, please check your junk folder.

“Dialing down the threat of ever-escalating tariffs and counter-tariffs has to be a plus for the investment environment in Canada, even if we still have residual uncertainty over trade with the U.S.,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce , said in an interview.

Business investment in Canada has been soft for years. Excluding housing, gross fixed capital formation accounts for roughly 11 per cent of gross domestic product , down from about 14 per cent at the end of 2014.

That weakness has hurt Canada’s wealth and productivity, and a revival in business investment has been a cornerstone of Carney’s economic plan since he was elected last year. His government’s 2025 budget pledged to “enable” $1 trillion in investments by 2030, a figure that includes government projects.

Constant uncertainty has sapped business optimism, and greater stability in the U.S. relationship might provide a spark. Carney’s government, working with two large pension managers, has organized an investment summit next month in Toronto. The event — which will lay out a dealbook of potential opportunities for foreign investors to deploy capital in Canada — has a better chance of success if U.S. trade tensions have been quelled.