Prime Minister Justin Trudeau’s plan to step down has business experts warning about the heightened uncertainty it has created and the need for a unified front to face the challenges ahead.
Trudeau’s announcement that he will resign once a new Liberal leader is chosen comes just weeks before Donald Trump, who has threatened to impose tariffs on Canadian goods, is sworn in as U.S. president.
The decision has ushered in a new wave of uncertainty, said RSM Canada economist Tu Nguyen.
“Canada’s economic policy uncertainty has surged to the highest in decades,” she said in a note, pointing to a Bloomberg index that aims to measure such uncertainty, which is running around double where it’s hovered in recent decades.
She said the uncertainty could temporarily deter investment flow into Canada, delaying the business recovery that rate cuts and easing inflation were expected to spur, and weakening Canada’s bargaining position at a time of tariff threats.
The potential economic hit from tariffs have business groups urging co-operation and unity following Trudeau’s announcement.
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Canadian Chamber of Commerce chief executive Candace Laing welcomed Trudeau’s announcement, saying it marks a turning point as the country faces unprecedented domestic and international issues.
“Canada can’t afford inaction with so much at stake. Unity is key: political leaders, businesses, and communities must come together around our common opportunities,” said Laing in a statement.
Business Council of Canada chief executive Goldy Hyder said that while Trudeau’s legacy includes positives, it’s unfortunate that so often the federal government was at odds with the private sector and there was a lost opportunity to create better conditions for long-term economic growth.
“Now more than ever, we must work together in a spirit of collaboration to help our country succeed.”
There will be limits to what the government will be able to do though, as Trudeau has also prorogued Parliament until March 24.
But whoever takes over leadership of the government once the dust settles will have limited options because of challenges like low productivity, barriers to lower taxes and poor international business relations, said Andreas Schotter, professor of international business at the Ivey Business School.
“There’s very little wiggle room right now to manoeuvre for any new leader.”
He said that while he’s taken issue with many of the Trudeau government’s policies, it’s important to focus on the future and facing the challenges ahead.
“This is over; we’ve got to move forward.”
Along with navigating the threat of tariffs from Trump, he wants to see new leadership work to improve business policies through reduced regulations and lower taxes, as well as improve relations with other trading partners.
“This will take some time, to repair and to structure again our international business competitiveness, and our international business alliances.”
