It should now be clear to Canadians that we face an existential threat from a United States that has gone full MAGA. In response, Canada must go full GIGA! Giga, of course, means “giant” in Greek, and that’s the size of the effort needed to protect Canada.
Canada’s giant response to the MAGA threat means that we must spend hundreds of billions of dollars over the next decade for our country to remain prosperous and secure. This will involve borrowing. This might even involve higher taxes. But it will not be unbearable, and over the long term the prosperity and independence we get from such spending would be worth it.
Failure to go GIGA will come at great cost economically and politically. If we are not willing to spend big and dream big, then we might as well say yes to becoming the 51st state right now and save us the trouble of pretending to fight back.
The U.S. has now become the biggest threat to Canada’s (and the world’s) prosperity and security. And let’s not fool ourselves in thinking that this will all be over in four years and all we need to do is hunker down until the Trump 2.0 storm has passed. The Trump-for-a-third-term movement is well under way. Even if Mr. Trump is no longer president in 2029, his administration, along with Elon Musk and others, are doing all they can to ensure the U.S. will still be under MAGA control by then.
Given our country’s geography, we cannot completely cut ourselves off from the U.S., but we must do everything in our power to reduce the leverage the U.S. has over our economy and our security, and do it fast.
This means we should bring the share of our total exports going to the U.S. down to 50 per cent from 75 per cent, and make the proportion of Canada’s interprovincial trade equal to its international trade (it is now 35 per cent and 65 per cent, respectively) within a decade.
The pillars of an effective response to the MAGA threat have been made clear over the last month: (1) remove barriers to interprovincial trade; (2) diversify our international trade away from the U.S.; (3) improve our productivity growth; and (4) increase our defence and security spending.
To that, we must add a fifth, less talked-about pillar: reducing our dependence on the U.S. for critical infrastructure. We should worry that Canada’s internet traffic is routed through the U.S. The same for oil coming from Western Canada. And what about satellite telecommunications services in the country’s remote regions being provided by Elon Musk’s Starlink?
A GIGA response means that Canada’s public and private sectors must work together to invest massively and rapidly to: (1) upgrade and expand Canada’s East-West infrastructures (energy, telecommunications, financial, digital, transportation, etc.); (2) launch new business ventures that reduce our economic dependence on the U.S.; (3) increase research and development to enhance innovation and productivity; (4) encourage and train Canadian small- and medium-sized enterprises (SMEs) to do business internationally beyond the U.S. and support them in the process; (5) upgrade and expand our security and defence capabilities; and (6) partner with similarly threatened, liberal-democratic allies (e.g., Australia, the European Union, Japan, South Korea, Mexico, New Zealand, Britain) to share ideas, technologies and resources (physical, financial and human) as well as preserve the international system of laws and institutions that has served us so well.
Such a GIGA strategy will require hundreds of billions of dollars a year in investment over the next decade.
Let’s start with defence. The federal government has committed to spending 2 per cent of GDP (in line with the NATO objective) by 2032, compared with 1.37 per cent today. According to the federal Office of the Parliamentary Budget Officer, this requires yearly defence expenditures to double, to $82-billion in 2032 from $41-billion today. However, accelerating the elimination of the Canadian military’s equipment readiness deficit, owing to decades of underinvestment, would likely push that amount above $100-billion a year.
Infrastructure will also requires tens of billions of dollars a year in investment. For example, the federal government has invested $35-billion to triple the TransMountain (TMX) pipeline’s capacity to bring oil to the West Coast for export to Asia. Telesat is investing $3-billion (with $2.5-billion in loans coming from the federal and Quebec governments) to create the Lightspeed Low Earth Orbit (LEO) broadband satellite constellation, which will compete with Mr. Musk’s Starlink. LNG Canada, which will soon go online, has required an investment close to $20-billion.
Such infrastructure projects are excellent ways for Canada to reduce its energy export dependence on the U.S. Nevertheless, more needs to be done. There’s now talk of reviving the Energy East and Northern Gateway projects, which were estimated to require $20-billion in investment prior to the COVID-19 pandemic (so, probably much more today).
The above numbers give a sense of the vast sums needed to make Canada more independent from the U.S., and they are just for infrastructure and defence.
We would need to invest hundreds of billions a year over the next decade to significantly decrease our vulnerability to the U.S. The public sector will need to lead the private sector in raising these funds, since the latter will only consider investing if the risks make business sense (National security risks don’t usually factor in business decisions).
With GDP at around $3-trillion, borrowing 30 per cent of GDP would mean securing $900-billion for Canada’s GIGA response to the MAGA threat. If this borrowing took place today by federal, provincial, territorial and municipal governments, it would bring the consolidated Canadian general government debt to a little above 130 per cent of GDP, which is where it was in 2020 because of the COVID-19 pandemic. It’s now back to around 100 per cent of GDP, which is the level where it has hovered since 2009.
The revenues generated from Canada’s GIGA investments will help pay back the debt. For example, TMX’s expansion has generated more than $10-billion in income since it came online last April. GIGA investments will also help ensure that Canada’s GDP continues to grow when compared with letting the U.S. eat our lunch. GDP growth will decrease the debt-to-GDP ratio of a GIGA borrowing.
To accelerate the debt’s reimbursement, federal and provincial governments could even increase their value-added taxes by a few percentage points over time. When the government of Stephen Harper cut the GST by two percentage points in 2009, it was estimated to have reduced the federal government’s fiscal revenues by $10-billion a year (at about $5-billion per point cut). Given how much the Canadian economy has grown since then, returning to a GST rate of 7 per cent could generate about $20-billion a year in additional federal tax revenues. A few extra GST points seem a small price to pay for Canadians to help ensure their country survives the existential threat posed by the U.S.
Are Canadian political and business leaders ready to work together and take on the GIGA challenge? Are Canadians ready to support them?
If Canadians and their leaders think we can secure our economy and sovereignty by continuing our happy-go-lucky, tinker-around-the-edges approach in an increasingly menacing and uncertain authoritarian world, then we will only have ourselves to blame if Canada doesn’t exist in a decade or two from now.
This blog was first published in The Globe and Mail on March 6th, 2025.
