Friday January 31, 2025 | VICTORIA, BC
by Mary P Brooke | Island Social Trends
This is a very interesting economic time, said BC Finance Minister Brenda Bailey in her opening remarks to media right after spending several hours today with top-flight economists from across Canada.
She said something that all governments and economic sectors are saying this month, that it’s difficult to plan budgets in a time of uncertainty — leaning particularly to the impact of potential US tariffs.
She had met in Vancouver today with the 13 private sector forecasters from across Canada — including senior economists of major banks — that make up the BC Economic Forecast Council (EFC).
The EFC noted that for BC — like all provinces — the economic outlook is affected by global and domestic forces, including federal immigration targets. In the absence of tariffs, the forecasters as a whole had expected steady economic growth for BC.
Uncertainty is the reality:
But that is not the situation that BC and Canada find themselves in. Uncertainty abounds due to the political and governance style of US President Donald Trump and the administration that he is building around him. Canadian provincial economies can no longer afford to be complacent or expect that things will be ‘steady’.
Today the economists offered their ideas and perspectives on a wide range of strategies and realities about the Canadian economy — particularly as tariffs form the US loom for a February 1 start tomorrow.
As a group, the assembled economists led by Minister Bailey explored directions and possible impacts of current economic conditions. They noted how BC’s resource sector is a boon for opportunities to strengthen BC’s economy.
Generating productivity & interest rates:
There is some danger in relying on the sale of raw resources (that’s been a Canadian economic problem for over a hundred years); it’s time for export diversification but also more research and development that leads to strong manufacturing at home. In that way, BC and Canada will have more products to sell as exports to many locations around the world, not just the USA.
Minister Bailey has said that introducing artificial intelligence (AI) in ways that boost productivity and working conditions is an exciting option for BC. She recently toured the Seaspan shipbuilding site in Vancouver where she saw those benefits first hand.
The Bank of Canada has remarked a few times over the past year that low productivity is a significant drag on the economy in Canada. The central bank this week indicated that they will be cautious about any further interest rate drops but some economists have expressed the need to see the rate be reduced all the way to 2% this year. That would help buffer the impacts of economic uncertainty and perhaps help boost investment which would help generate some additional productivity.
Reviewing everything:
Today in her media session Minister Bailey repeated her stance that the BC government will be “taking a good hard look at everything” as her department prepares Budget 2025. She highlighted the government’s public sector hiring freeze and the government-wide efficiency review (within that highlights programs that might not still be effective, as well as ministry travel costs and administration costs) that was inscribed into the mandate letters of all ministers that were issued on January 16.
She said that with regard to what is a near-certain coming of tariffs starting tomorrow (expected at 25% across all imports of Canadian goods into the USA), that Canada is making “strong efforts at resolving this diplomatically”. But the diplomatic approach may not meet with usual levels of success given the different style of the new US administration.
Canada’s premiers have been meeting weekly with the prime minister, and the premiers are still set to visit Washington on February 12 as a group to meet with governors and senor administration in Washington. That will be a continuation of diplomatic efforts led by both the federal government and the Council of the Federation (with Ontario Premier Doug Ford as chair).
25% assumption:
Recently Bailey had said that an assumption of 25% tariffs would be applied to Budget 2025 and the period of 2025 to 2029 (aligning with the four years that US President Donald Trump will be in office).
Today Bailey would not say whether the previous declaration that the BC Finance modeling in Budget 2025 will include the assumption of 25% tariffs across the board for four years would still be the approach by her ministry. She reiterated how this is a time of uncertainty and how hard it is to plan under conditions of uncertainty.
BC’s budget modeling was not discussed or analyzed by any of the economists at the meeting this morning, Bailey noted. It’s unclear whether BC’s economic modeling around the tariffs is coming entirely from ministry staff or whether external input (as received today) will have any impact on decision-making of that nature.
Comparatively speaking:
In recent days, Premier David Eby compared the upcoming tariff impact to that of the 2008 Great Recession. But in fact the economic impact will at first be more direct on certain sectors that rely on product exports.
The economy will likely become more difficult but not in the way that the economic crash of 2008 immediately caused to household solvency.
Minister Bailey did not respond to the question of comparison to the Great Recession, when asked by media today. Instead she said there are “positive opportunities to diversify”.
Diversification of export markets:
Over the past few weeks various elected leaders across Canada have emphasized the need for more inter-provincial trade across Canada.
While there would be some lag-time while regulations are revised or sorted out (including transport/trucking requirements), the work to finally get around to doing what economists have suggested for years would be fruitful.
Finding new international markets would help reduce the reliance that Canadian business has on exporting to the USA. It seems like something that should have happened anyway. BC already started that with forestry in recent years, including with appropriate sectors in Norway, Thailand and India.
People come first in BC:
It may not inspire full confidence in British Columbians who are hoping or expecting that their provincial government will have their backs as the impacts of tariffs hit the BC economy. Bailey reiterated today how economic sectors that are directly impacted will be supported (that might logically include forestry or mining sectors).
Even when first appointed as finance minister on November 18, Bailey said that people will always come first in the BC budget. However, direct handouts of funds across the population have — by some economists — been seen to be inflationary.
Premier Eby outlined a three-part strategy around tariffs that is intended to protect the BC economy and British Columbians.
Boosting productivity:
Bailey heard from economists today that economic productivity falls far short of where it needs to be across Canada, including in BC. It remains to be seen whether BC can or will undertake more initiatives to support small and mid-size businesses with the goal of improving productivity.
Government procurement might be more effective than grants. It helps businesses show to prospective new customers that they have a viable or in-demand product and a steady customer for that product.
The majority of jobs in Canada are provided by small business but under the economic conditions of the past few years there has been little incentive for smaller businesses to invest in ways and means to increase productivity.
BC will support both people and businesses. “We must do both and it is necessary to do both,” said Finance Minister Brenda Bailey today.
She said that she has “huge faith in our business sector” to take on the challenge of meeting the needs of BC’s economy. In fact, she was told at the Vancouver Board of Trade meeting yesterday that business are on board for that challenge.
She repeated what she said back on December 17 about the 2024/25 deficit and planning for BC Budget 2025: “You can’t pour from an empty cup,” said Bailey regarding her ‘optimism’ about growing BC’s productivity and economic strength and how that will support the social policy supports for households.
Less than optimal productivity has been a problem across Canada for now 30 or 40 years. Some economic sectors and classes zoomed ahead and succeeded very well, while many other sectors and households fell into economic stagnation or have even fallen behind.
Revisions after February 1:
The Economic Forest Council will have an opportunity up to February 4 to revise their forecasts and feedback to the BC finance ministry.
Budget 2025 will be released on March 4.
===== RELATED:
- Jan 29: Bank of Canada drops interest rate to 3.0% (January 29, 2025)
- Eby appoints BC cabinet committee on economy & tariffs (January 29, 2025)
- Premier Eby continues his tough talk on US tariffs (January 28, 2025)
- Eby delivers tough tariff talk as ministers get mandate letters (January 16, 2025)
- BC Premier Eby on Canada’s strategy around US tariffs (January 15, 2025)
- Canada’s Premiers to discuss tariffs on Feb 12 in Washington DC (January 10, 2025)
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