Mark Carney, when he was appointed prime minister of Canada in March 2025, said he had “campaigned in prose and will govern in econometrics”. In other words, he would use quantitative economic models to guide policy. The approach has worked in some areas but it is one which has little relevance to trade negotiations with the US.
The econometric approach has been used in the management of government spending and policies relating to productivity improvement.
On government spending, the aim is for day-to-day/operating spending and revenues to be in balance by 2028–29; and to ensure that the deficit/GDP ratio declines.
Carney's government sees Canada's poor productivity performance as the central structural problem of the economy and has built policy around improving this. Canadian productivity growth averaged only about 0.3% p.a. over the ten years 2014-2024, far weaker than the US (1.9%).[1]
This can be improved with targeted investment spending.
A target of C$500bn of additional private investment over five years has been set. The government calculates this could raise real GDP by 3.5% by 2030. To encourage such investment, accelerated depreciation and immediate-expensing measures are estimated to provide roughly C$2.7bn a year in support and could generate up to about C$9bn of additional output annually over ten years.
As far as public investment is concerned, the 2025 Budget includes estimates of the multiplier effect on long-run GDP: for infrastructure investment 0.8–2.7 and for R&D 0.8–1.9.
This approach is very much "governing in econometrics".
Trade policy
Mainstream economic analysis generally finds that broad tariffs are economically costly. That message is not appreciated by President Trump. Carney has imposed retaliatory tariffs against the United States, including the measures implemented on September 8, worth about C$20bn of US imports. Canada and China are the only two economies to retaliate to US tariffs. Longer-term there is an attempt to reduce Canada's dependence on the US, notably by building stronger trade relations with Asia and Europe. The latest US tariffs on Canada could well be found illegal but the journey of US-Canada tariffs is certain to be a troublesome one for some time to come.
Inflation
Inflation control is the responsibility of the central bank, where Carney was previously governor. On that front, Canada can claim a high degree of success. Maybe econometric models have helped. The all-items inflation rate has been within the 1-3% target range in all but two months since January 2024; core inflation has been within target since September 2023. In this area, Canada’s inflation control has been superior to that of the US.
Emissions
In one other area, however, CO2e emissions per head, Canada is similar to the US and is not on track to reach net zero in 2050.
Fiscal Position
Gross government debt, although above 100% of GDP, is expected to fall over the next five years. In that sense the debt position looks broadly sustainable. But corporate and household debt are both also above 100% of GDP. That leads to some vulnerability if the trade was with the US were to turn even nastier, with an adverse effect on Canada’s growth.
External Position
The small current account deficit and sizeable net foreign assets make for a strong external position.
Money and Credit
The level of private sector credit is high but has fallen from a peak of 245% of GDP in 2020. Money growth is broadly consistent with inflation objective. The policy rate was cut to 2.25% in October 2025. With regard to the oil shock, Canada is likely to see stronger growth and higher inflation, raising the prospect of the policy rate rising at some stage.
Governance and Competitiveness
Canada scores highly on economic freedom and is a clean country in terms of perceived corruption. Its corruption perception score is 10 points above that of the US.
Currency
The Canadian dollar looks fairly valued against the US dollar, being in line with The Economist’s GDP-adjusted PPP rate.
[1] Bergeaud, A., Cette, G. and Lecat, R. (2016): Productivity Trends in Advanced Countries between 1890 and 2012, Review of Income and Wealth. vol. 62(3), pages 420–444, updated February 2026. See http://www.longtermproductivity.com.