As the threat of a trade war with the U.S. looms, the province needs to gird its loins, says the Business Council of B.C.
The council’s new report is urging the NDP government to start with its upcoming budget by getting its own fiscal house in order, and developing a more welcome investment climate by cutting taxes and regulations.
“The Trump administration has our industrial base in its sights,” BCBC vice-president of policy David Williams said in a press release accompanying Monday’s report, Strengthening B.C.’s Economy Amid U.S. Tariff Threats.
“B.C. must respond by ensuring this province is an attractive place to invest, build businesses and retain skilled workers relative to the United States.”
B.C.’s new finance minister, Brenda Bailey, will bring down her first provincial budget March 4 – a budget that will inescapably be written in red ink.
The BCBC is urging the NDP to tackle its ballooning deficit problem – a problem that becomes harder to deal with when the economy contracts and government revenues fall.
The provincial deficit was last estimated to be $9.4 billion, which represents 2.2 per cent of B.C.’s total GDP, the BCBC report notes.
“Without improved economic growth on a population-adjusted basis, sooner or later the province will face difficult decisions: significantly increase taxes or reduce spending growth to stabilize its debt burden.
“Adopting a clear fiscal anchor, such as establishing a timeframe to balance the budget, cap debt servicing costs at three to four per cent of total expenses, or reducing provincial debt below 20 per cent of GDP, would demonstrate a credible commitment to fiscal discipline.”
To improve B.C.’s investment climate, the report says tax cuts are needed. It notes that B.C. has the highest tax burden on all forms of new capital investment in Canada at 25.6 per cent. It recommends the removal of the provincial sales tax on capital investments.
The threat of Canadian goods and commodities facing tariffs of 25 per cent has underscored the importance of trade diversification.
One new export that is not reliant on the U.S. is natural gas exports through liquefied natural gas. It’s expected that all of the LNG exported from B.C. would be destined for Asia, and would therefore avoid American tariffs on energy.
One hundred per cent of the $2.4 billion worth of natural gas exported from B.C. in 2024 went to the U.S., according to BC Stats. New markets in Asia for that gas will begin to open later this year when the new LNG Canada terminal in Kitimat, B.C., begins exporting.
But there are obstacles in the way that may prevent any expansions or new LNG plants from being built in B.C. There are concerns that the partners in LNG Canada may defer making a final investment decision on a Phase 2 expansion that would double the plants export capacity – an investment that would represent billions of dollars.
The BCBC urges the provincial government to remove some of those obstacles, including oil and gas emissions caps.
“B.C. can diversify its trading partners and expand its economy, while reducing global greenhouse gas (GHG) emissions, by fully supporting our resource sector, including LNG,” the report urges.
“Several policy changes will be key to this strategy, including sending a clear signal that the province will not be implementing any emissions caps on oil, gas and natural gas utilities.
“This would open the way for companies to choose B.C. to develop and export its low-GHG-intensity natural gas to Asia-Pacific markets. This supports Indigenous reconciliation, energy affordability, and energy security while reducing global emissions. It is the single biggest thing we can do to support long-term prosperity.”
It also urges the government to tweak its new carbon pricing system for industry – the output-based pricing system (OBPS).
“B.C.’s industrial carbon pricing … places excessive burdens on trade-exposed industries. This undermines the province’s ability to attract investment and incentivizes production to shift to other jurisdictions. In the context of global trade disruptions, reforming the OBPS is essential to improving B.C.'s investment climate and economic competitiveness.
“Key reforms should focus on loosening performance benchmarks, lowering reduction factor thresholds, revising tightening rates and fully reforming the compliance credit system.”
