How Trump’s ‘Big Beautiful Bill’ Could Affect Canada

News Analysis

It was clear from U.S. President Donald Trump’s election campaign and first executive orders that tariffs wouldn’t be the only way he would make waves in Canada.

Trump’s executive orders signed on day one of his second term as president gave clear policy directions that he was reversing course on a number of key issues including net-zero emissions policies, energy, and immigration in which for years the Trudeau and Biden administrations had been aligned.

Now those directions are becoming law with Trump’s “One Big Beautiful Bill Act,” signed on July 4. The bill had a rocky passage through Congress, with a few Republicans voting against due to concerns such as increasing deficit and debt.

Meanwhile, Trump has promoted the bill as a way to unleash the U.S. economy. The bill contains tax cuts and sizable deregulation. It notably extinguishes a slew of federal climate change programs implemented by the previous administration under President Joe Biden.

Given the close integration of Canadian and U.S. economies, the bill will have major impacts on Canada as well.

Slashing Net-Zero Emissions Initiatives

Aside from boosting economic activity in the oil and gas and timber sectors, Trump’s bill takes a chainsaw approach to slashing the funding of multiple net-zero emissions initiatives, many of which had been implemented via Biden’s Inflation Reduction Act. This includes billions of dollars to fund electric or low-emission heavy-duty vehicles like school buses and garbage trucks, reduce diesel emissions, and address air pollution.

The new bill also rescinds funds destined for the Greenhouse Gas Reduction Fund, the Low Emissions Electricity Program, and the Environmental and Climate Justice Block Grants, among other energy initiatives and tax incentives.

The megabill also terminates a slew of climate-related credits, such as for clean electricity production and investment.

Relevant for Canada amid its push to compel car manufacturers to sell only zero-emission cars by 2035, Trump’s bill terminates the “clean vehicle tax credit” after September 2025, worth up to US$7,500.

This is likely to reduce electric vehicle (EV) sales in the United States and impact the overall North American market. Automakers in Canada lobbied Prime Minister Mark Carney this week in an effort to have him drop the federal EV mandate.

The Economy

Through the legislation, Trump is offering more tax cuts and also giving support to the oil, gas, and coal sectors, which could be draw more investments in those industries. If Canada doesn’t manage to keep pace, this could deepen its productivity and prosperity gap with the United States.

The Bank of Canada famously said last March that it was time to “break the glass,” as in a case of emergency, regarding the country falling behind in terms of productivity.

As for prosperity, typically measured by GDP per capita, Canada has also been significantly lagging.

Canada and the United States were on par in 2013, after which the GDP stagnated in Canada while rocketing up south of the border. The gap was $42,000 in 2024, with GDP per capita in Canada being nearly $74,000 compared to over $116,000 in the United States.

On June 26, Parliament adopted government Bill C-5 to remove federal interprovincial trade barriers and reduce approval time to build major projects deemed to be in the national interest.

The Liberal government has also passed a 1 percent reduction to the lowest personal income tax rate, resulting in a net cost of $28 billion to federal coffers over five years, according to the Parliamentary Budget Officer.

But everything in the United States is, unsurprisingly, bigger. The Tax Foundation has estimated that Trump’s bill will reduce federal tax revenue by US$5 trillion between 2025 and 2034.

These big tax cuts are accompanied by a more aggressive stance toward using more of America’s energy potential.

Whereas Ottawa and the provinces are still not on the same page regarding the benefit of building more pipelines, Trump declared a “national energy emergency” when he took office and called for “unleashing American energy” in his raft of initial executive orders.

This is formally taking shape in the One Big Beautiful Bill. On the issue of onshore oil and gas leasing, the bill strikes provisions around royalties passed through the Inflation Reduction Act of 2022, President Joe Biden’s signature piece of legislation. This act had increased the minimum royalty rate for federal leases from 12.5 percent to 16.67 percent, making it more costly for businesses to operate.

The megabill also has a number of other provisions to expand onshore and offshore oil and gas activities, helping to fulfill Trump’s promise to “drill, baby, drill.”

With Canada being the United States’ top foreign supplier of crude oil, representing 60 percent of imports, and with 25 percent of oil being refined in the United States coming from Canada, Trump’s talk in recent months that his country doesn’t need Canadian oil was notable. Increased domestic production will bring him closer to that goal.

Trump also said the United States doesn’t need Canadian timber, and his bill has provisions to boost domestic logging. The bill says the National Forest System (NFS) and the Bureau of Land Management (BLM) have to sell a certain amount of timber each year. It calls for an annual increase of 250,000,000 board-feet of timber sold from NFS land and 20,000,000 board-feet from BLM land.

The United States imposes duties on softwood lumber coming from Canada, a longstanding trade dispute between the two countries. It remains to be seen whether increased timber production in the United States will have an impact on that dynamic, and whether the duties will remain as part of the trade deal being negotiated between Ottawa and Washington.

Border Security

Illegal immigration and border security have been major focuses of the Trump administration. Through the threat of tariffs, Trump forced Canada’s hand to allocate more funding and resources to boost border security.

But his crackdown on illegal immigration also led to speculation that it would result in more people attempting to enter Canada illegally from the United States.

So far, however, a major influx hasn’t been seen at the border.

Even after the increased operations by Immigration and Customs Enforcement, which made international news after the recent riots in Los Angeles erupted, the RCMP told The Epoch Times the situation at the U.S. border has remained normal.

“No increase on our side in Quebec,” said a spokesperson for RCMP’s C Division. “Everything is stable.”

It remains to be seen if this changes with the implementation of Trump’s megabill.

The Big Beautiful Bill has a number of clauses related to increased immigration enforcement, whether through hiring additional officers or funding removal operations. House Minority Leader Hakeem Jeffries, a Democrat, criticized the bill on that front immediately before it was adopted in the House of Representatives, saying it would result in a “deportation machine that will be unleashed on steroids.”

Defence

Trump already had a sizable impact on Canadian defence and security before the adoption of his bill. Ottawa boosted border security in a bid to avoid tariffs and has introduced related security legislation. Carney has also pledged to meet NATO’s previous defence spending guideline of 2 percent of GDP this year and agreed to the military alliance’s new goal of 5 percent, as advocated by Trump.

Now, the new legislation authorizes initial funding to begin Trump’s plan of creating a “Golden Dome,” an air defence system to protect against sophisticated missile threats. Canada has been in discussion with the United States on the matter. Trump has put the price tag of Canada’s participation in the dome at US$71 billion.

Sections of the megabill relate to “Next Generation Missile Defense Technologies” and “Layered Homeland Defense” and include amounts totalling over US$24 billion for items such as accelerating hypersonic defence systems.

Carney, after hosting last month’s G7 Summit in Alberta, said there are “many reasons” why partnering with the United States on the Golden Dome “would make sense.”

“Part of the spirit, unfortunately, of these discussions is that the world is a much more dangerous place,” he said on June 17.