Fourth Time’s the Charm? What Canada’s 2025 Federal Election Means for Your Business

This article was written by DMCL. It is taken from the quarterly overview of Canadian news, a newsletter published by the Canadian member firms of Moore North America. The article, analyzing the impact on businesses of the recent federal election, is part of our mission to become the partner par excellence in your success by keeping you informed of Canadian news.

Canada’s 2025 federal election has ushered in a new era of leadership, with Mark Carney and his Liberal Party securing a minority government—the fourth mandate in a row for the Liberals. As businesses across the country look ahead, this government’s policy direction promises both stability and transformation, especially in areas like taxation, trade, innovation, and housing. Whether they will deliver on those promises remains to be seen.
Below, we break down what the outcome means for Canadian businesses based on the Liberals’ campaign promises and how to prepare for what’s next.

Tax relief—but with limits

One of the most immediate takeaways from the Liberal platform is the planned reduction
of the lowest federal personal income tax rate from 15% to 14%. While not a game-changer
on its own, this adjustment could benefit business owners and professionals with middleincome compensation models, offering some relief amid economic uncertainty.

Crucially, the government has also opted against increasing the capital gains inclusion rate—a move that was floated by the previous Liberal government and widely opposed by the business community. This decision will be welcomed by investors, entrepreneurs, and anyone managing significant capital assets.

On the environmental front, the federal consumer carbon tax was eliminated effective April 1, 2025, which could reduce costs for logistics-heavy businesses and those in energy-intensive sectors. However, the industrial carbon pricing system remains in place, meaning large emitters will still face compliance costs.

Cross-border trade: Still a headwind

When the U.S. election in 2024 brought a red wave, it also ushered in a wave of trade tensions. With President Trump reinstating tariffs on Canadian steel, aluminum, and energy products, Canadian exporters remain in a delicate position.

Carney has been clear: Canada won’t capitulate. His government has publicly rejected proposals to more closely integrate economically or politically with the U.S., instead signaling a pivot toward greater trade diversification. Expect to see more energy put into economic alliances with Europe and Asia in the coming months. Businesses with U.S. exposure should continue to monitor trade developments closely and evaluate supply chain contingencies.

Housing and real estate: A shot in the arm

The Liberal government’s housing strategy includes a new “Build Canada Homes” plan that’s expected to increase both supply and affordability. One of the headline promises is the removal of GST for first-time homebuyers purchasing new homes up to $1 million, a change that could save buyers as much as $50,000. This measure is particularly relevant in urban centres like Vancouver and Toronto, where new home prices often bump into this threshold.

To support the construction needed, the government has committed over $25 billion in financing to developers of prefabricated and modular homes. It also plans to act as a direct developer by building houses on underused public lands. This approach is intended to help double the pace of housing construction and ease pressure on Canada’s overheated real estate markets.

These efforts could drive increased activity across construction, real estate, and related professional services, particularly in B.C. and Ontario where affordability and supply constraints are most acute.

Innovation, grants, and AI infrastructure

Mark Carney’s Liberals have committed $1 billion in new funding for the Venture Capital Catalyst Initiative (VCCI), aimed at helping Canadian companies scale and compete globally. The program targets strategic sectors like AI, cybersecurity, clean tech, and biotechindustries seen as essential to Canada’s future economic competitiveness.

In addition, the government is encouraging major public-sector pension funds (such as CPP and PSP Investments) to allocate more of their portfolios to domestic venture investments. This could open up larger pools of capital for Canadian growth companies, especially those looking to commercialize new technologies.

With both private and public funding support increasing, this is a favourable environment for earlystage firms to seek investment, and for advisors to help position those companies for growth and government engagement.

Environmental policy: Mixed signals

While the federal consumer carbon tax was eliminated effective April 1, 2025, the industrial carbon pricing system remains intact. That means major emitters—particularly in oil and gas, manufacturing, and transportation—are still required to pay for emissions above established thresholds, under the federal Output-Based Pricing System.

The government has also recommitted to capping emissions from the oil and gas sector. While specific benchmarks and timelines haven’t yet been announced, the cap will likely be implemented in a phased manner, targeting absolute emissions rather than production levels. This gives producers and large emitters some predictability—but also a signal that compliance planning needs to continue.

These policies suggest a pivot toward balancing decarbonization with economic growth. Businesses with large environmental footprints will still face regulation, but with clearer federal direction and less consumer-facing tax complexity.

What should businesses do now?

Whether you’re running a fast-growing tech firm, managing a family-owned enterprise, or advising high-net-worth clients, here are a few strategic actions to consider:

• Update your tax strategy: With lower personal tax rates and no changes to
  capital gains, it’s a good time to revisit remuneration strategies and entity
  structures.
• Plan for trade uncertainty: If you rely heavily on U.S. customers or suppliers, start
  evaluating your exposure and building alternatives.
• Tap into innovation programs: Explore funding and advisory opportunities tied
  to federal VC and AI infrastructure initiatives.
• Track housing incentives: Real estate developers and adjacent service providers
  should get ready for increased demand and investment flow.

Canada’s 2025 federal election outcome brings a blend of continuity and change. While tax hikes have seemingly been avoided and innovation is getting a boost, cross-border tensions and regulatory complexities aren’t going anywhere.