By John Manning, International Banker
After nine eventful years in office, Justin Trudeau’s reign as Canada’s prime minister has drawn to a close. Following his announcement on January 6 that he would step down from the leadership of the Liberal Party of Canada and the country’s top job and with the transition to hand the reins over to his successor, Mark Carney, completed, it seems an ideal moment to reflect on the economic legacy that Trudeau leaves behind. With a few monumental wins under his belt, but also a series of undeniable failures, the Trudeau years are likely to be viewed as having had decidedly uneven impacts on the Canadian economy.
The outgoing prime minister first entered office in 2015 with a firm commitment to strengthening the middle class as a key engine of economic growth. “A strong economy starts with a strong middle class,” the Liberal Party’s official election platform stated at the time. “Our plan offers real help to Canada’s middle class and all those working hard to join it. When our middle class has more money in their pockets to save, invest, and grow the economy, we all benefit.”
This economic goal was mostly achieved through a handful of key childcare policies. “We will cancel tax breaks and benefits for the wealthy—including the Universal Child Care Benefit—and introduce a new Canada Child Benefit to give Canadian families more money to raise their kids,” the policy platform also promised. “With the Canada Child Benefit, nine out of ten Canadian families will receive more than under Stephen Harper’s confusing collection of child benefit programs. For the typical family of four, that means an additional $2,500 in help, tax-free, every year.”
Indeed, the administration largely stayed true to its word, with the introduction of the Canada Child Benefit (CCB) as a replacement for both the Universal Child Care Benefit (UCCB) and the family tax cut adopted by the previous administration, doing much to support low- and middle-income families with children under 18 and thus lowering poverty rates. “The Canada Child Benefit significantly reduced the poverty rate among households with children between 2015 and 2022,” according to Luc Godbout, a professor in Université de Sherbrooke’s taxation department and holder of the research chair in taxation and public finance. “For example, the poverty rate for children living with couples fell from 13.2 per cent to 6.8 per cent, and from 39.2 per cent to 26.9 per cent in single-parent families headed by women,” Godbout wrote in a recent article for Policy Options, the digital magazine of Canadian think tank the Institute for Research on Public Policy.
Trudeau also allocated $27.2 billion in 2021 over five years to trim the cost of childcare to just $10 per day by 2025-26, which has not only helped to make childcare affordable for ordinary Canadian families but also encouraged more female participation in the labour force. “As a government, we introduced the first-of-its-kind, universal $10-a-day child care program, so that families can save thousands of dollars every year and access affordable child care,” the Office of the Prime Minister explained in a statement issued on March 6. “Because of our Early Learning and Child Care program, 900,000 children across Canada are getting affordable, high-quality child care, and families are saving up to $16,200 per child, per year.”
To reinforce the success of this flagship policy, Trudeau announced in the same statement that the federal government had reached early-learning and childcare extension agreements with 11 out of 13 Canadian provinces and territories to ensure families “get all the supports they need so they can join the workforce or continue their career[s] while raising their kids”. Such extensions would thus enable provinces and territories to receive a hefty $36.8 billion to create new childcare spaces, reduce waitlists and hire more early-childhood educators across the country, the statement added.
“Along with extending these agreements, we are also increasing the funding that they provide by 3 per cent per year for four years, starting in 2027-28, to help make sure that federal funding keeps up with the cost of child care operations,” Trudeau also noted. “This means more families can continue to access child care, find savings, and get ahead. This investment will also help us reach the goal of creating 250,000 child care spaces across the country by March 2026.”
While such programmes have been viewed in a considerably favourable light, they also reflect the Trudeau administration’s undeniably insatiable appetite for raising spending and straining government finances, which perhaps represent the most glaring blemishes on Trudeau’s record. Indeed, the government’s budget remained in deficit during every year that the outgoing prime minister was in office, spiking to the biggest-ever deficit in the 2020-21 fiscal year and accumulating more than $600 billion.
“While the 2020-21 deficit was ostensibly incurred for the war on COVID-19, in hindsight it was much larger than it needed to be,” Livio Di Matteo, professor of economics at Lakehead University and a member of the Canadian Institute for Health Information’s National Health Expenditure Advisory Group, wrote in a January 9 article for local digital news outlet The Hub. “Deficits have been a means to help finance a long-term expansion in the federal fiscal footprint, which, notwithstanding the pandemic bump, went from just over 14 percent in 2017 to over 17 percent in 2024.”
While the COVID pandemic can also undoubtedly claim responsibility for much of this fiscal expansion, as governments all across the world ramped up expenditures to support economic activity amidst stringent lockdowns, Canada’s public debt continued to rise even after the pandemic subsided. As such, government debt figures surged from 628.9 billion CAD in 2015 to 1.17 trillion CAD by the end of 2023, a whopping 86-percent increase.
Canada’s housing-market crisis represents another low point on Trudeau’s end-of-term economic scorecard, to the extent that the country’s housing shortage was dubbed “The Canadian Press News Story of the Year”. While annual population growth in the country has averaged around 3 percent in recent years, largely off the back of substantial inflows of workers and students from overseas, housing supply has not kept up, creating a widening market imbalance that has sent house prices skyrocketing.
Local housing markets in major metropolitan areas such as Toronto have been further squeezed by rapidly rising demand from global investors seeking to expand their portfolios, boost their rental incomes or flip properties for handsome profits amid bullish environments, according to Geordie Dent, the former executive director of the Federation of Metro Tenants’ Associations (FMTA) in Toronto. “Developers and homeowners broadly want to see prices continue to increase, so we can expect a battle between those that want high interest rates to tame inflation and those that want it low to help force a return to cheap money and high housing prices,” Dent also acknowledged in a January 15 article for news publication The Maple. “Team ‘keep prices high’ has many friends in Ottawa—landlords and real estate investors are well represented on Parliament Hill.”
Of course, high prices ended up being a persistent feature of many governments around the world—Trudeau’s included—and not just for housing but throughout the economy, which did much to eat into the nominal economic gains that the outgoing administration managed to achieve. Indeed, Canada’s nominal gross domestic product (GDP) grew by around 41 percent from 2015 to 2024 when ignoring inflation, or from 1.56 trillion USD to 2.33 trillion USD, according to figures from the International Monetary Fund (IMF). Given the enormous 33.1-percent rate of cumulative inflation for the US dollar that the IMF calculated during this period, however, Canada’s real GDP growth rate across Trudeau’s tenure was, in fact, less than 8 percent—or under 1 percent on average for every year of his time in power.
How does this performance stack up against those of previous Canadian governments? Not particularly well. A study by the Fraser Institute published in April 2024, which compared the per-capita growth performances of Canada’s five most recent long-serving prime ministers, found that Trudeau’s ranked last among the five. By making a crucial adjustment for the surge in population growth more recently, the study revealed that it was Jean Chrétien, who served as prime minister from 1993 to 2003, who came out on top with a 2.4-percent annual per-capita GDP growth rate, followed by Paul Martin, who was prime minister from 2003 to 2006, registering 2-percent growth. Brian Mulroney (1984 to 1993) and Stephen Harper (2006 to 2015) ranked in fourth and fifth positions at 0.8 percent and 0.5 percent, respectively, with Trudeau in fifth position at just 0.3 percent per year.
“Of course, some defenders will blame COVID for Trudeau’s poor economic growth record, but you can’t reasonably blame the steep but relatively short pandemic-related recession for nearly a decade of stagnation,” Ben Eisen, a senior fellow at the Fraser Institute, a right-leaning Canadian public-policy think tank, said of the study’s findings. “There’s no single perfect measure of economic performance, but per-person inflation-adjusted economic growth is an important and widely used measure of economic success and prosperity. Despite any claims to the contrary, Justin Trudeau’s legacy on economic growth is—in historical terms—dismal. All Canadians should hope that his successor has more success and oversees faster growth in the years ahead.”
This “dismal” legacy has also translated into alarming declines in the average Canadian’s living standards, with real GDP per capita shrinking over extended periods under Trudeau’s rule. “Although Statistics Canada’s main dataset here currently ends at Q4 2023, the available numbers are dismal for Trudeau,” Adam Zivo noted in a January 10 article for the Canadian broadsheet news publication National Post. “Worse yet, Canada’s real GDP per capita is now precipitously declining. It fell by 4.4 per cent between Q2 2022 and Q4 2023, which is a rate comparable to the recession of the early 1990s, and appears to still be dropping.”
According to Canadian banking major Royal Bank of Canada (RBC), moreover, per-capita GDP declined by 1.4 percent in 2024 as a whole “but edged up ~0.8 percent (annualized rate) in Q4”. As such, GDP growth on a per-capita basis has now been in negative territory for eight of the last nine quarters, only further compounding Trudeau’s severe underperformance on this front.
As he leaves office, however, Trudeau’s economic legacy might just be given one final shot in the arm, as his response to the tariff war initiated by the United States under President Donald Trump has been viewed favourably. On March 4, Trump launched trade wars against Canada, Mexico and China—the US’ three biggest trading partners—imposing 25-percent tariffs on Canadian and Mexican imports, 10-percent tariffs on Canadian energy and doubling the tariffs he placed on Chinese imports a month earlier to 20 percent.
Trudeau immediately responded by confirming that Canada would slap tariffs on more than 100 billion USD of American imports over the ensuing three weeks. “Today, the United States launched a trade war against Canada, their closest partner and ally—their closest friend,” he posted on X shortly afterwards. “Canadians are reasonable, but we will not back down from a fight. Not when our country is at stake.”
He also confirmed that he had spoken with President Trump about continuing negotiations to remove the tariffs completely. “Our border is secure, and less than 1 percent of the illegal fentanyl entering the United States comes from Canada. Even so, we took action with our $1.3 billion plan to further strengthen our border,” Trudeau said during one of his final appearances at a press conference in Ottawa on March 6. “Our goal remains to get these tariffs—all tariffs—removed. In the meantime, we’ll be taking action to support Canadians through the tough times ahead.”
Indeed, the resilience Trudeau showed in his final few days at the helm in staring down Trump’s tariffs will do little harm to his economic legacy and follows a laudable record in office of forming key strategic trade deals with Canada’s international economic partners. For example, the Trudeau government proved its deftness when negotiating the United States-Mexico-Canada Agreement (USMCA), the trade pact that replaced the North American Free Trade Agreement (NAFTA). Trudeau’s government has also been instrumental in advancing other free-trade agreements, including the Comprehensive Economic and Trade Agreement (CETA) with the European Union (EU) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with 10 Asia-Pacific (APAC) countries and the United Kingdom (UK).
Ultimately, then, Trudeau’s legacy when it comes to the Canadian economy is likely to be viewed with a mixture of praise and disappointment, with gains for the country’s middle class being offset by the lacklustre per-capita growth and declining living standards experienced by the average Canadian citizen. With Trudeau’s successor being a highly regarded former governor of the central banks of both Canada and the United Kingdom, however, Canadians will be hoping that Mark Carney can bring much of his proven expertise in economic stewardship to his role as the country’s new prime minister.