Feds plan pandemic-style bailout for workers, companies if Trump imposes tariffs
The federal government is planning a multibillion-dollar, pandemic-style bailout for workers and businesses if U.S. President Donald Trump follows through on his threat to impose 25-per-cent tariffs on Canadian goods as early as Feb. 1, two sources say.
The sources said some of the measures, such as waiving the one-week waiting period for employment insurance benefits, do not require parliamentary approval. But the bulk of potential spending on new programs to help laid-off workers and businesses affected by tariffs will require legislative approval, which could not take place until Parliament resumes sitting on March 24.
The Globe and Mail is not identifying the sources, who were not authorized to discuss cabinet deliberations.
Prime Minister Justin Trudeau prorogued Parliament on Jan. 6, the day he announced his plan to step down and call a leadership contest as he faced the prospect of being defeated by the opposition parties. This suspended parliamentary activity, including sittings in the Commons and Senate.
The government expects U.S. tariffs could lead to mass layoffs and drive up the cost of goods for consumers. Canadian companies will likely respond not only by cutting jobs but by curtailing production. Businesses would lose money and some would have to close. The sources said the emergency measures would help Canadians pay for rent and groceries and allow businesses to pay bills and meet payroll.
Ontario Premier Doug Ford, who is expected to call an election this week, has said he believes tens of billions of dollars in pandemic-style spending will be needed to keep the economy afloat in the event of U.S. tariffs. He has also said the tariffs could cost Ontario 500,000 jobs.
When COVID-19 struck in 2020, the government rolled out an $82-billion aid package to help Canadians and businesses that included income support, wage subsidies and tax deferrals. The measures included $27-billion in direct support to workers and another $55-billion to help business liquidity through tax deferrals.
One of the sources said the federal cabinet is of the opinion that billions of dollars of aid do not need to flow immediately even if Mr. Trump hits Canada with punishing tariffs on Feb. 1. They note a Jan. 20 executive order from Mr. Trump suggests a different timeline. The “America First Trade Policy” order directs federal officials including the Secretary of Commerce by April 1 to investigate the United States’ trade deficits with major trading partners and also assess “unlawful migration and fentanyl flows” from Canada, Mexico and China into the United States “and recommend appropriate trade and national security measures to resolve that emergency.”
The source said the aid package could be ready to roll out once Parliament resumes. But it would require co-operation from the opposition parties in that they would have to delay their declared intention of bringing down the minority Liberal government until the relief legislation is adopted. The Conservatives, Bloc Québécois and NDP have all said they would defeat the Liberal government at the first opportunity.
No discussions have taken place with the opposition parties at this point, the source said.
Goldy Hyder, president of the Business Council of Canada, said that while Ottawa can’t tell the independent Bank of Canada what to do, he hopes the central bank will be ready to provide more liquidity – in effect, to make more money available to lend or use if people or businesses need it. Mr. Hyder said he would also hope that regulatory rules covering banks could be adjusted to offer banks more flexibility to address the needs of customers, such as small businesses, coping with an economic slowdown.
Former finance minister Chrystia Freeland, who is running for the Liberal leadership, called Monday for a $200-billion plan to retaliate against Mr. Trump’s threatened tariffs. She said Ottawa should direct all federal agencies to stop immediately the purchase of all U.S. goods if the tariffs come into effect and encourage the provinces to do the same.
Ottawa should also ban U.S. companies from bidding on Canadian government contracts, including infrastructure and defence procurement, she said.
Mr. Trump originally used the threat of tariffs to demand that Canada and Mexico tighten their borders and stop the flow of fentanyl into the U.S. Mr. Trump has since spoken about using trade to compel Canada to become part of the United States, an idea strongly rebuked by the Prime Minister, Liberal leadership candidates and the leaders of the opposition parties.
In his first term, Mr. Trump imposed a 25-per-cent tax on Canadian steel products and 10 per cent on aluminum. Canada retaliated with its own tariffs on American goods and Mr. Trump later relented in the face of domestic pressure.
Separately, Foreign Affairs Minister Mélanie Joly said Monday that she is contacting international allies as Ottawa tries to dissuade Mr. Trump from proceeding with tariffs.
She’s reaching out to Mexico, Britain and European Union member countries.
“At the heart of my conversations with my British colleagues and my European colleagues is going to be the question of how to respond to tariffs,” Ms. Joly told reporters.
“We have to be extremely pragmatic when it comes to working with the Europeans and also with the U.K. on this. President Trump has referred to using tariffs against the world,” she said.
Ms. Joly is heading to Washington this week for a meeting with the new U.S. Secretary of State Marco Rubio, at which she will make Canada’s case against tariffs. “We are the biggest customer of the U.S. We are the biggest customer in 36 states within the U.S.,” she said. “So there are lots of allies in the U.S. and also in Washington.”
This article was first reported by The Globe and Mail
