Austerity is class war amidst the trade war

While Trump’s trade war is hitting the Canadian economy, Mark Carney is insisting on a devastating round of austerity to ensure it is workers who pay, not profits, reports John Clarke

It becomes clear that the Canadian economy can’t possibly escape the impacts of Trump’s protectionist turn and his use of tariffs against former US allies. Unemployment is rising and the cost-of-living crisis for working-class people continues to bite. At the same time, the federal government of Mark Carney is attempting to compensate for these impacts and to preserve the profitability of Canadian capitalism by imposing massive measures of austerity that will have a devastating effect on workers and communities.

On 13 March, the CBC reported that ‘Canada’s economy lost 84,000 jobs in February while the unemployment rate edged up to 6.7 per cent, Statistics Canada said on Friday, a setback for the labour market and one of the worst monthly job losses seen in years outside of the pandemic.’ It is striking, moreover, that the ‘decline in employment was largely driven by a drop in full-time and private sector jobs … Employment mostly fell in the goods and services-producing industries, with 18,000 jobs lost in wholesale and retail trade, 12,000 lost in construction and 9,200 lost in manufacturing.’

Analysts had expected that the job market would produce a modest 10,000 new jobs, so this is a particularly worrying development. One senior economist noted that it ‘shows that labour market slack has increased and activity is frozen amidst trade uncertainty.’

At the same time as this bleak news has emerged, as Yahoo Finance reports, the latest figures on Canada’s inflation rate are just encouraging enough, having fallen to 1.8% in February from 2.3% in January, to make it likely that the Bank of Canada will opt to leave interests rates where they are for the present. However, this improvement may well signify nothing more than the ‘calm before the storm’ given ‘the oil-driven spike that is surely coming to headline inflation in the next few months’ because of the US and Israeli attack on Iran.

It must also be noted that the official accounting on inflation pays scant attention to the realities of a cost-of-living crisis that is impacting working-class and poor people to a greater degree. In February, Policy Options drew attention to the ‘structural challenges such as wage stagnation, precarious employment and growing housing unaffordability.’

It is particularly noteworthy that shelter inflation ‘has consistently outpaced overall inflation, driven by rising rents, utilities and mortgage interest costs. Renters, who make up about one-third of households, have experienced some of the sharpest affordability pressures, with rising rents consuming a growing share of their income.’ Such pressures, coupled with stagnant wages and increasing job insecurity may seem of little importance to senior economists but they are livid issues for millions of people.

Trade disruption

Meanwhile, the Carney government continues to try to reconfigure a viable trading relationship with the US. The CBC reported, on 13 March, that for ‘the first time since U.S. President Donald Trump called off negotiations last October — ostensibly over a TV ad — Prime Minister Mark Carney’s point man on trade met face to face with his White House counterpart.’

Nothing meaningful was divulged with regard to the results of the meeting but the report points out that it comes ‘at a pivotal moment for the $1.3-trillion Cdn annual trading relationship between the two countries.’ US tariffs remain in effect on a range of Canadian goods and ‘the Canada-U.S.-Mexico Agreement (CUSMA) is up for renegotiation.’

While trade with Canada is of major importance to the US, such is the disparity in economic power between the two countries that the Trump administration is far better placed to obtain favourable terms than is the Carney government. Patriotic bluster about ‘standing up to a bully’ aside, this simple reality is insurmountable.

As Carney salvages what he can and prepares to swallow a bitter pill, his government continues to minimise the damage by increasing trade with other countries to the greatest degree possible. At the same time, recognising that unfavourable terms in dealings with the US will cut deeply into the profits of Canadian capitalism, Carney is implementing a ruthless strategy to impose the costs on the working class.

Even as unemployment rates climb and those still employed feel the squeeze of a cost-of-living crisis that the war on Iran will make much worse, Carney has embarked on an unprecedented austerity drive. Its impacts are already being felt but they are going to become far more severe in the months ahead.

The scale on which the Carney government intends to gut public services and the public-sector workforce is breathtaking. Last August, The Maple reported that a ‘government spending review included an announcement of deep cuts: 7.5 per cent in 2026-27, 10 per cent in 2027-28 and 15 per cent in 2028-29.’ Austerity on such a scale would be nothing less than devastating.

To the measures unfolding at the federal level, we must also add the massive impacts of the implementation of comparable cuts by Canada’s provincial and territorial governments, that have responsibility for an enormous portion of the programmes and services on which people rely. In this regard, the writing is already well and truly on the wall.

On 18 February, Global News reported that, largely due to the economic uncertainty generated by US tariffs, provincial revenues were falling and deficits increasing. In this context, there ‘will be pressure now on provincial governments to find savings and to find those savings in areas of service delivery where advocates might not be as strong as in other areas … people who are in the lowest socioeconomic brackets who make the least money might be affected.’

The adoption of austerity measures will doubtless be undertaken by provincial governments on the basis of a political consensus. According to CBC News, in November of last year, Ontario’s finance minister, Peter Bethlenfalvy, issued an economic statement that proclaimed that: ‘These trying times demand we maintain a steady fiscal hand and work to restore balance.’ This right-wing government, however, is not striking a discordant note with its promise of intensified austerity.

On 3 February, the Vancouver Sun noted that ‘British Columbians are being warned to brace for possible large cuts to government spending that could be coming to programs and supports for families, seniors and those with mental-health or substance-use challenges, with advocates saying the cuts could herald a new era of austerity.’ This path is being followed by the social-democratic NDP, which holds power in BC and it clearly has no serious differences with the Ontario Tories on the need to impose the burden of the trade crisis on the working class.

‘Middle powers’

In his celebrated speech at Davos, Mark Carney struck a confident pose with regard to the way forward for what he described as ‘middle powers’ in the new context of the America First turn and the harsh economic and political realities this brings with it. Though some mistakenly imagined that Carney was arguing for a just new global order, his speech actually set out the notion of a more independent and assertive role for the lesser imperialist powers that have functioned as junior partners of the US.

Due to its uniquely high level of economic integration with the US and its trade dependency on the greater power to the south, Canada expresses the difficulties and uncertainties created by turn the US has made under Trump with a particular sharpness. For all his bluster, however, Carney has no clearer alternative to pose in the face of this situation than Keir Starmer or the EU leaders. His pitiful flip-flopping on Trump’s illegal ‘war of choice’ against Iran is evidence enough of that.

Carney may be floundering in the face of Trump’s tariffs but, when it comes to making workers and communities pay the price for the adverse impact they will have on capitalist profits, he is entirely ruthless and single-minded. He is quite ready to respond to the threat of trade war by adopting measures of class war at home.

A period of unprecedented austerity is now coming down on the working class in Canada. It will undermine an already seriously degraded social infrastructure, even as unemployment rises and Trump’s assault on Iran goes over to disastrous levels of international economic dislocation.

In taking this approach, Carney can count on his provincial counterparts, across the political spectrum, to support him and to join in the attack. The united response of Canada’s ruling establishment to Trump’s trade measures will open the door for some major and decisive class battles in the period opening up before us.