Canada’s economic challenges

Taking Stock - Transcript Summary

Key Concepts:

• Canadian Automotive Industry: Declining domestic auto assembly, shift in manufacturing from US to Japanese companies, government incentives for EV adoption.
• Critical Minerals: US efforts to secure supply chains, China’s dominance in rare earth mining and processing.
• Infrastructure Investment: Ontario’s Darlington nuclear facility refurbishment, potential for Small Modular Reactors (SMRs), need for increased infrastructure spending in Canada.
• Economic Outlook (2026): Cautious forecast for Canadian economic growth, dependence on US trade relations, impact of government spending and consumer confidence.
• Municipal Infrastructure Deficit: Calgary’s water main break as a symptom of broader infrastructure issues across Canada.
• USMCA/CUSMA Negotiations: Uncertainty surrounding the future of the trade agreement and its impact on Canadian businesses.

Business Briefs – Key Developments

The segment began with a series of business briefs outlining recent developments:

• Automotive Strategy: The Canadian federal government announced a $3 billion industry adaptation fund and $2.3 billion in EV purchase incentives. Targets include 75% EV sales by 2035 and 90% by 2040, with expectations of increased manufacturing through new trade agreements.
• Decline in Domestic Auto Assembly: A report from the Trillium Network for Advanced Manufacturing revealed a significant drop in cars assembled in Canada, from 2.3 million in 2016 to 1.2 million in 2025. This decline is largely attributed to reduced production by US automakers (Ford, GM, and Stellantis), whose share fell from 56% to 23% over the same period, while Japanese automakers increased their share.
• US Critical Mineral Reserve: The US is establishing “Project Vault,” a $12 billion critical mineral reserve funded by the Export-Import Bank, to secure supply chains. This is in response to China’s control of approximately 70% of global rare earth mining and 90% of rare earth processing.
• Mining Sector Consolidation: Eldorado Gold and Foreign Mining are merging in a $3.8 billion share swap, coinciding with rising gold and silver prices. Eldorado is developing a gold and copper mine in Greece, while Foreign is initiating production at a gold, silver, and zinc mine in Saskatchewan.
• Darlington Nuclear Refurbishment: Ontario’s Darlington nuclear facility refurbishment was completed four months ahead of schedule and $150 million under budget. The facility is also developing four Small Modular Reactors (SMRs).

Canadian Economic Outlook for 2026 – Interview with Don DeJardins

The interview with Don DeJardins, Chief Economist of Deote Canada, focused on the economic forecast for 2026.

• Cautious Optimism: DeJardins expressed a cautious outlook, anticipating modest growth of around 1-1.5% in 2026, with a “soft start” to the year. This forecast is contingent on maintaining relatively tariff-free access to the US market and the successful implementation of government policies.
• Importance of US Trade: He emphasized the critical importance of the US market, stating that continued access at relatively tariff-free rates is a “big assumption” underpinning the forecast.
• Government Policy Traction: DeJardins highlighted the need for tangible progress on announced government initiatives (e.g., Port of Montreal investments) to boost business confidence and investment. He noted that businesses are currently hesitant due to uncertainty.
• USMCA/CUSMA Negotiations: He predicted a resolution to the USMCA/CUSMA negotiations, suggesting that a deal will be reached due to the reliance of US companies on Canadian supply chains, though it may include caveats or changes.
• Government Spending & Debt: While typically concerned about government debt, DeJardins argued that infrastructure investment is currently necessary. He pointed out that debt service as a percentage of government revenue is currently at 101 cents (compared to 38 cents in previous periods of concern), indicating some fiscal room for continued spending.
• Business Confidence: He stressed the importance of restoring business confidence to stimulate investment and consumer spending.
• Mortgage Renewals: He acknowledged the impact of mortgage renewals in 2026 on consumer spending and overall economic activity.
• Upside Potential: DeJardins acknowledged the possibility of an “upside surprise” if a favorable US trade deal is secured, potentially leading to earlier and stronger growth.

Notable Quote:

“I usually am [worried about government spending], [laughter] but at this stage, I have to say I think we need the infrastructure being built.” – Don DeJardins

Calgary Water Main Break & Infrastructure Deficit

The segment concluded by referencing a recent water main break in Calgary, framing it as a symptom of a broader municipal infrastructure deficit across Canada. The segment indicated that further discussion on this topic, featuring the Mayor of Calgary, would follow.

Technical Terms:

• EV (Electric Vehicle): A vehicle powered by an electric motor, rather than an internal combustion engine.
• SMR (Small Modular Reactor): A nuclear reactor that is smaller than traditional reactors, designed for easier and faster construction and deployment.
• USMCA/CUSMA (United States-Mexico-Canada Agreement): The trade agreement replacing NAFTA, governing trade between the three countries.
• Rare Earth Minerals: A set of seventeen chemical elements used in various high-tech applications, including electronics, renewable energy, and defense.

Synthesis/Conclusion:

The broadcast presented a mixed outlook for the Canadian economy in 2026. While modest growth is anticipated, it is heavily reliant on maintaining favorable trade relations with the US, successful implementation of government policies, and a restoration of business confidence. The segment also highlighted critical issues facing the Canadian economy, including the decline in domestic auto manufacturing, the need to secure critical mineral supply chains, and the urgent need to address the growing municipal infrastructure deficit. The overall tone was cautiously optimistic, emphasizing the importance of proactive measures to mitigate risks and capitalize on potential opportunities.