Finance Minister Bill Morneau says the government is conducting a “deep dive” analysis into how it can prepare for economic uncertainties being created by aggressive U.S. tax cuts and the ongoing NAFTA negotiations.

Morneau’s comments come after Justin Trudeau’s government released its third budget Tuesday, which do not include tax cuts or incentives that some economists and business leaders had recommended to help Canada’s competitiveness vis-à-vis the United States.  

“What I can tell you is that we are doing our analysis now,” Morneau said in an interview with BNN. “It’s a deep dive appropriately for us to think about how we make sure our economy remains competitive.”

Despite those lingering uncertainties stemming from the U.S., the budget paints a confident picture of the economy, which Morneau says helps Canada negotiate with the U.S. and Mexico in the NAFTA talks from a position of strength. 

”We, of course, are in a better negotiating position because our economy is doing well,” said Morneau. “We are going to continue to negotiate and make sure we get to a deal that’s hopefully better and certainly must be to Canadians.”

Morneau, did, however, acknowledge the government is considering what the potential impact may be from NAFTA actually collapsing.

“We believe it is important to have a strong trading relationship with Mexico and the United States,” Morneau said. ”We know that supply chains are intertwined. So, there would be impacts on businesses and that’s why we’re working hard to get to what we hope will be an improved arrangement and making sure we have a resilient economy to deal with any changes is the prudent way to manage against that risk.”

But it’s not just NAFTA that is raising concerns about Canada’s economic competitiveness. There have been questions raised about the federal government tightening corporate tax rules in Canada as the U.S. lowers its corporate tax rate.

Morneau says it’s too early to tell what the U.S. impact will be.

“They haven’t even written all the regulations around these [U.S.] tax changes,” Morneau said. “We’re carefully going through them. Our goal, of course, is to remain competitive.”

The finance minister also said it is possible to have competitive tax rates and be fiscally responsible.
“The people who ask me about changes in tax rates – lowering them – are the same people who tell me to be fiscally responsible. So, we need to consider those two objectives simultaneously and that’s exactly what we’re doing.”



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