Prime Minister

Mark Carney

’s government is launching a new $5-billion “strategic response fund” to help businesses across all sectors diversify and build a new economy in response to the “rupture” to

trade

and

supply chains

caused by policies of the

United States

, Canada’s largest trading partner.

The fund can be tapped to help pay for a range of responses to

tariffs

and other protectionist U.S. policies, from pivoting to new products and markets to retraining workers and retooling plants, Carney announced Friday, adding that it can be used to offset the cost of tapping new export markets.

Priority projects will target trade-exposed sectors or companies facing “signficant” losses, decreases in profitability. or job losses. The fund will also prioritize large-scale projects with front-end development costs including engineering design as well as capital costs to pivot products or markets.

The new fund was announced as part of a suite of government loans, incentives and retraining programs aimed at responding to the trade and supply chain disruption spurred by the administration of U.S. President

Donald Trump

since he took office early this year.

“Canada’s economy in the future will rely less on one single trading partner and will be based on solid foundations, a strong Canadian market, vigorous Canadian demand, and diversified trading partners,” Carney said.

 

Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said the new and tweaked programs are clearly “Plan B” for the government, with hopes of a return to full free trade unlikely under Trump’s presidency.

“Every little bit helps… to minimize the damage from the trade frictions,” he said.

“(However), retraining people for other jobs concedes that employment could be on a weaker path in those sectors, and supporting a retooling to have them make products more suitable for the domestic market recognizes the damage to our share of the U.S. market.”

Among the announced initiatives, Carney said the government will expand a regional tariff response initiative to $1 billion from the initial $450 million earmarked in March to help small and medium-sized businesses.

 

To give immediate relief to hard-hit companies, the Business Development Bank of Canada loans for small and medium-sized enterprises (SMEs) will be increased to $5 million, and Carney pledged to provide more flexible financing through the Large Enterprise Tariff Loan Facility.

Canada’s canola and agricultural sectors, which have been hard hit by the recent trade war as well as other skirmishes in recent years, will receive specific relief. For example, Ottawa plans to introduce a new biofuel production incentive, with more than $370 million for domestic producers to address immediate competitiveness challenges.

 

The government also plans to amend clean fuel regulations to help support the domestic biofuels industry, and to temporarily increase the interest-free limit of an advance payments program to $500,000 for canola advances. Ottawa will also provide increased funding to the AgriMarketing Program to support diversification into new markets of agricultural products.

“We cannot control what other nations do,” Carney said. “We can control what we give ourselves – what we build for ourselves.”

He addressed the impact on workers of the “rupture” in the relationship between Canada and the United States and announced that Ottawa will adopt “bridge” benefits for those laid off as a result of tariffs. Twenty weeks will be added to employment insurance benefits, for a total of 65 weeks. Ottawa is also targeting retraining for 50,000 workers, in part by automatically enrolling laid off workers and connecting them to training opportunities.

Canada’s unemployment rate rose to 7.1 per cent, with the economy losing 66,000 jobs in August.

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“The impact of tariffs and economic disruption is starting to show, and the numbers are worrying,” said Anupriya Gangopadhyay, an economist at the Canadian Chamber of Commerce.

Rebekah Young, head of inclusion and resilience economics at Bank of Nova Scotia, said the package unveiled by Carney on Friday responds to developing economic trends while sticking to fiscal costs outlined when the trade turmoil took hold last spring.

“It’s clear the economy is slowing – and acutely so in some sectors and regions of the country,” she said, adding that the package brings new tools to offset “urgent” near-term impacts and seed important longer term diversification strategies for workers and businesses.

“The federal government has signalled much larger investments in retooling the Canadian economy that would complement today’s announcements — so we are likely seeing an initial downpayment today.”

• Email: bshecter@nationalpost.com