Canada’s 2025 Budget Emphasizes Economic Sovereignty and Innovation

The newly released 2025 Canadian federal budget emphasizes economic sovereignty and innovation, marking a significant shift in the government’s priorities. While the budget does not contain the whimsical proposal of giving every Canadian $10,000, it features the term “investment” more than 800 times, alongside mentions of “sovereignty” and “productivity.” The phrase “Buy Canadian,” absent in previous budgets, appears 20 times, highlighting a new approach toward supporting domestic companies.

Benjamin Bergen, president of the Canadian Council of Innovators (CCI), expressed optimism about the budget’s implications for the innovation landscape in Canada. He stated, “Today’s budget represents an important step toward building trust with Canada’s innovators and the broader business community.” Bergen emphasized that the government is beginning to engage in meaningful discussions about economic sovereignty, a shift he considers both welcome and overdue.

The budget sets the stage for a potential new era of “Buy Canadian” policies, but Bergen cautions that translating these intentions into tangible outcomes will require more than mere rhetoric. He posed a critical question to tech leaders during a recent CCI debrief: “How are we making sure that dollars that we’re investing in procurement are actually going to domestic firms when we talk about ‘Buy Canadian’?” This question will likely shape perceptions of the budget’s success or failure for Canadian innovators.

Defining Canadian Economic Sovereignty

The theme of sovereignty has gained prominence in policy discussions over the past year. Daniel Perry, CCI’s director of federal affairs, underscored its importance. He urged Prime Minister Carney and his team to collaborate closely with industry leaders to develop programs and procurement strategies that favor Canadian companies.

But defining what constitutes a “Canadian” company remains a challenge. Perry stressed that clarity is essential to ensure investments benefit domestic rather than foreign interests. “Without a foundation of clarity, we risk deploying these investments that we see in this budget in the same status quo ways,” he cautioned. Bergen echoed this sentiment, stating, “True sovereignty requires more than spending. It requires understanding that in the 21st century, economic value is created through intangible assets, proprietary datasets, and control of intellectual property.”

This clarity could determine whether Canada fosters an innovation economy anchored in domestic ownership or continues to develop foreign subsidiaries. Bergen remarked, “Investments are only measured by the value of their returns. Without a clear strategy to capture those returns for Canada, we’re left with government spending, not strategic investment.”

Investment Priorities and Structural Reforms

The 2025 fiscal plan amounts to $585 billion, with a projected deficit of $78.3 billion. It introduces new measures across various sectors, including innovation, defense, and digital infrastructure. A key component is the modernization of the Scientific Research and Experimental Development (SR&ED) program, which is designed to expedite and scale innovation.

According to Perry, the budget confirms significant updates to the tax credit, which now applies to the first $6 million of eligible spending, increased from $4.5 million. For the first time, newly eligible Canadian public companies can participate, which Perry describes as a long-awaited change. “The government has reaffirmed its commitment to including capital expenditures,” he said, highlighting the importance of this adjustment for tech firms.

Bergen noted that these reforms indicate that Ottawa is actively listening to the needs of innovators. “The government’s commitment to SR&ED reform demonstrates that they’ve been listening to innovators,” he stated. However, Perry cautioned that the effectiveness of these reforms hinges on actual implementation. “Announcements don’t make scale. Contracts do,” he emphasized.

The budget also includes $81.8 billion in defense spending over five years, along with new authorities for the Canada Infrastructure Bank to invest in digital infrastructure and artificial intelligence. Bergen remarked, “This is Canada’s chance to do defense procurement right.” He pointed out that Canadian companies are developing world-class technologies and emphasized the necessity of prioritizing domestic procurement to support local industries.

Laurent Carbonneau, CCI’s director of policy and research, highlighted the budget’s tone as a notable shift in how the government addresses national competitiveness. He stressed that future economic prosperity will depend on supporting firms that create value through intangible assets rather than physical infrastructure. “There’s a need to catch up on a lot of traditional industries that have perhaps not seen as heavy investment in the last 10 years or so,” he noted.

While the budget signals progress, CCI leaders emphasize that execution is key. Bergen stated, “These must not be symbolic gestures. They require substantive policy shifts for business leaders to see these promises realized.” As the organization continues to work with the government, the focus remains on ensuring that commitments translate into meaningful actions.

As Canada navigates this new economic landscape, the emphasis on keeping Canadian companies at the forefront of policymaking will be crucial. The 2025 budget may represent a turning point, but only time will tell if it translates into lasting benefits for the Canadian innovation ecosystem.