Canadian Fiscal Policy and Infrastructure Spending Analysis

This document is a report that analyzes the implications of the ongoing trade war on Canada's economy, specifically focusing on fiscal policy and infrastructure spending. It outlines the economic slowdown in Canada due to increased tariffs on exports to the U.S. and the resulting uncertainty. The report details a proposed fiscal support package aimed at offsetting the negative impacts of these tariffs, estimating that a package of 1.25% of GDP at its peak would be necessary. This package includes temporary measures such as increased transfers or tax rebates to individuals and a permanent rise in public infrastructure expenditures. The report also discusses the potential inflationary effects of this fiscal support and the importance of maintaining a sustainable fiscal position while promoting economic recovery. It emphasizes the need for timely and effective fiscal measures to support the economy during downturns while avoiding excessive inflationary pressures. The analysis is based on a macro-econometric model of the Canadian and U.S. economies, providing a detailed examination of the expected economic impacts.