Fraser Institute
Atlantic provinces should focus on growth—despite Carney’s transfer policies
From the Fraser Institute
By Alex Whalen
In his election platform, Prime Minister Mark Carney promised there will be no cuts to federal transfers for the duration of the his government’s term. Nowhere is this pledge more relevant than in Atlantic Canada. As of last year, federal transfers represented 33.4 per cent to 38.7 per cent of provincial revenues in the Maritimes (the highest levels in Canada), and 19.0 per cent in Newfoundland and Labrador.
Why? Mainly because of Canada’s equalization program, which (to paraphrase) redistributes federal funds to poorer provinces to help them maintain comparable service levels.
Setting aside the various issues of the equalization program, self-sufficiency and economic growth has been thrust to the forefront in Atlantic Canada recently, due in part to President Trump’s destructive economic policies, and perhaps also due to the prospect of policy change at the federal level. Premier Tim Houston has talked explicitly about the need for Nova Scotia to be more self-reliant, while the Council of Atlantic Premiers has emphasized the need for collaboration, removal of regional barriers and the imperative to strengthen the economy.
In a region with a long history of being dominated by government, there’s a risk that Carney’s policy to maintain federal transfers, or a stabilization in Canada-U.S. relations, may reduce the perceived importance of the newfound emphasis on growth. This would be a mistake.
In fact, creating the policy conditions for stronger growth, and therefore reducing reliance on federal transfers, should be a top priority for all four governments in Atlantic Canada, regardless of Trump or Carney’s policies. So, what can be done?
Nova Scotia’s recent policy shift to emphasize natural resource development—including removing bans on uranium mining and fracking for natural gas—is a good start. New Brunswick’s new government has also emphasized the importance of increased mining activity to grow its economy. Natural resource development attracts much-needed investment and jobs that pay well above average wages. However, the industry faces a large regulatory burden and governments must be laser-focused on improving competitiveness. Secondly, governments in the region should restrain spending and redirect those funds to lower their crushing tax burdens. The four Atlantic provinces have among the highest personal income and business income taxes in North America, both of which hurt growth by making the region relatively less attractive for people and capital.
More government does not work. Some provincial governments such as British Columbia and Ontario have used the economic situation spurred by President Trump to open up provincial spending taps, which is a costly approach. Again, Atlantic Canada is the most government-dominated region in the country, and an extensive body of research has connected excessively large government with slower growth.
The newfound emphasis on growth and self-sufficiency among Atlantic Canada’s premiers is a welcome development. Growing incomes and improving living standards should be a top priority for all governments in the region. Higher levels of economic growth would mean lower federal transfers, which would better position the region for any fluctuations ahead. Carney’s transfer policy must not breed complacency among Atlantic premiers.
From the Fraser Institute
By Jake Fuss and Grady Munro
For years, Canadians have experienced a decline in living standards. According to new data from Statistics Canada, living standards may finally be headed back in the right direction, but there’s still much work to be done.
The new numbers show that inflation-adjusted gross domestic product (GDP)—the final value of all goods and services produced in the economy—grew by 0.5 per cent during the first three months of 2025. During that same period, population growth slowed considerably to just 0.2 per cent. For perspective, the average quarterly population growth last year was three times this rate at 0.6 per cent. As a result, inflation-adjusted per-person GDP—a broad measure of individual living standards—grew by 0.4 per cent to reach $59,146 at the end of March 2025.
This is a good sign as it marks the first time living standards have improved for two consecutive quarters (per-person GDP grew 0.1 per cent to end 2024) since the first half of 2022, but we must temper our optimism. Economic growth remains relatively weak compared to historical numbers. And a per-person GDP of $59,146 is still 2.6 per cent below the mid-2022 level ($60,718). For comparison, per-person GDP in the United States after the first three months of 2025 is 4.9 per cent higher than in mid-2022.
Simply put, Canadian living standards remain well below levels they’ve been in past years and growth has fallen well behind growth south of the border, meaning governments across Canada must take steps to promote economic growth.
Recently, there has been a push in Canada to eliminate interprovincial trade barriers, which inhibit the free flow of goods and services between provinces and act as a drag on the economy. Several provinces have already taken steps towards this end, and the federal government has committed to eliminate all federally-imposed trade barriers by Canada Day. These efforts are long overdue, and should be joined by all governments across the country.
Governments should also get their finances in order and finally stop adding to the mountain of debt. In 2025/26, nine out of 10 provinces (except Saskatchewan) and the federal government plan to run budget deficits—meaning they will spend more money than they collect in revenues and thus must borrow additional funds. Consequently, government debt will continue to rise.
Rising government debt acts as a drag on the economy. Indeed, research suggests that when combined federal and provincial government debt exceeds the entire size of the economy (as it did in seven out of 10 provinces in 2022) additional debt offers little benefit to economic growth, and instead inhibits growth in the economy. As such, governments across the country must lower spending to balance their budgets and chip away at this mountain of debt.
Finally, governments should also pursue comprehensive tax reforms to lower the tax burden and make Canada more attractive to professionals, businessowners and entrepreneurs, while also improving the economic incentives to work, save and invest. Without meaningful reform, Canada’s tax system will continue to inhibit economic growth and, consequently, living standards.
New economic data suggest that Canadian living standards have improved in recent months, but we must temper our optimism. Governments across the country should pursue meaningful policy reforms to help grow the economy and improve prosperity.
From the Fraser Institute
By Kenneth P. Green
The vision of an all-electric transportation sector, shared by policymakers from various governments in Canada, may be fading fast.
The latest failure to charge is a recent announcement by Honda, which will postpone a $15 billion electric vehicle (EV) project in Ontario for two years, citing market demand—or lack thereof. Adding insult to injury, Honda will move some of its EV production to the United States, partially in response to the Trump Tariff Wars. But any focus on tariffs is misdirection to conceal reality; failures in the electrification agenda have appeared for years, long before Trump’s tariffs.
In 2023, the Quebec government pledged $2.9 billion in financing to secure a deal with Swedish EV manufacturer NorthVolt. Ottawa committed $1.34 billion to build the plant and another $3 billion worth of incentives. So far, per the CBC, the Quebec government “ invested $270 million in the project and the provincial pension investor, the Caisse de dépôt et placement du Québec (CDPQ), has also invested $200 million.” In 2024, NorthVolt declared bankruptcy in Sweden, throwing the Canadian plans into limbo.
Last month, the same Quebec government announced it will not rescue the Lion Electric company from its fiscal woes, which became obvious in December 2024 when the company filed for creditor protection (again, long before the tariff war). According to the Financial Post, “Lion thrived during the electric vehicle boom, reaching a market capitalization of US$4.2 billion in 2021 and growing to 1,400 employees the next year. Then the market for electric vehicles went through a tough period, and it became far more difficult for manufacturers to raise capital.” The Quebec government had already lost $177 million on investments in Lion, while the federal government lost $30 million, by the time the company filed for creditor protection.
Last year, Ford Motor Co. delayed production of an electric SUV at its Oakville, Ont., plant and Umicore halted spending on a $2.8 billion battery materials plant in eastern Ontario. In April 2025, General Motors announced it will soon close the CAMI electric van assembly plant in Ontario, with plans to reopen in the fall at half capacity, to “align production schedules with current demand.” And GM temporarily laid off hundreds of workers at its Ingersoll, Ontario, plant that produces an electric delivery vehicle because it isn’t selling as well as hoped.
There are still more examples of EV fizzle—again, all pre-tariff war. Government “investments” to Stellantis and LG Energy Solution and Ford Motor Company have fallen flat and dissolved, been paused or remain in limbo. And projects for Canada’s EV supply chain remain years away from production. “Of the four multibillion-dollar battery cell manufacturing plants announced for Canada,” wrote automotive reporter Gabriel Friedman, “only one—a joint venture known as NextStar Energy Inc. between South Korea’s LG Energy Solution Ltd. and European automaker Stellantis NV—progressed into even the construction phase.”
What’s the moral of the story?
Once again, the fevered dreams of government planners who seek to pick winning technologies in a major economic sector have proven to be just that, fevered dreams. In 2025, some 125 years since consumers first had a choice of electric vehicles or internal combustion vehicles (ICE), the ICE vehicles are still winning in economically-free markets. Without massive government subsidies to EVs, in fact, there would be no contest at all. It’d be ICE by a landslide.
In the face of this reality, the new Carney government should terminate any programs that try to force EV technologies into the marketplace, and rescind plans to have all new light-duty vehicle sales be EVs by 2035. It’s just not going to happen, and planning for a fantasy is not sound government policy nor sound use of taxpayer money. Governments in Ontario, Quebec and any other province looking to spend big on EVs should also rethink their plans forthwith.
Kenneth P. Green
Senior Fellow, Fraser Institute
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