John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.
2025 will be remembered as the year of reversals, a watershed moment when our sleepy naïveté was checked by an old maxim that British prime minister Lord Palmerston famously voiced in 1848: “We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.”
Canadians spent more than a decade investing in an imagined reality that believed co-operation among nations could rapidly solve climate change, that decarbonizing our own and other western economies would be achieved while bolstering prosperity and employment opportunities. That Canada had “eternal allies” who would defend us, even when we didn’t bother to defend ourselves.
The path forward in 2026 and to a future with higher living standards is for Canada to live in the real world, rather than retreat to an imagined one.
Evidence that Ottawa is tacking toward reality surfaced in the days before Christmas, when the federal government took official and definitive steps to walk back its 2022 prohibition on the manufacture and export of single-use plastics, which was set to come into effect as of Dec. 20 this year.
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In the fall, federal Environment Minister Julie Dabrusin spoke plainly about the reason: “The export ban is not expected to lead to a net decrease in plastic waste with few peer countries following suit and many international buyers simply switching away from Canadian suppliers.” Canada’s plastic-product manufacturing businesses generated $35-billion and employed 85,000 in 2023, according to Ottawa.
The country’s Clean Fuel Regulations, passed in 2022 with the intention of producing less carbon-intensive fuels, had similar foreseen consequences that must now be mitigated. Using the U.S. Inflation Reduction Act that was passed into law during the presidency of Joe Biden, the production of clean fuels in the United States is heavily subsidized to reduce end-user costs.
By 2024, 73 per cent of all credits in Canada for farmers and industries buying fuels that met CFR standards came “from imports,” government assessments show. The country’s entire biofuels industry is now in jeopardy. Both Ottawa and some provinces have produced large support packages to make CFR-standard fuels in Canada competitive with the U.S.
Such subsidies are unsustainable. Much like the plastics-manufacturing business, Canada is likely to reverse CFR standards to save the country’s biofuel industry, the jobs it supports and the revenues it generates. It can’t win a subsidy war against the U.S.
Taxation proved to be a field of lessons, too, for Canadian policy makers in the world of real economics. The federal government’s fall budget took one of those lessons to heart by eliminating the 2022 luxury tax on boats and aircraft, a let-the-wealthy-eat-crumbs policy that had cost Canadian sales and manufacturing jobs as buyers of boats and planes went to the U.S. and the Bahamas, where such taxes do not exist.
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A similar outcome arose in June, with Canada’s proposed Digital Services Tax, a 3-per-cent levy on revenue earned from Canadian customers by big U.S. tech firms such as Google Inc., Meta Platforms Inc. and Amazon.com Inc. Confronted with U.S. realpolitik embodied in significant retaliatory tariffs, Ottawa backed off.
The June about-face came soon after the two most important domestic realpolitik reversals on taxes that generated genuine disdain in the business community and among a majority of voters.
Cancelling the increase in capital gains taxes in March was the first. The tax was sold in Ottawa’s 2024 budget as a tax-the-rich-scheme, and struck many entrepreneurs and high-earning individuals as a way of preventing people from ever becoming rich. Economists argued it would further incentivize investment flows out of Canada and to the U.S.
This was followed a month later by scrubbing the consumer carbon tax on fossil fuels used for transportation and to heat homes.
More recently, Ottawa’s détente with Alberta resulted in cancelling the federal emissions cap, suspending the Clean Electricity Regulations, delaying methane-emissions reductions, new talk of pipelines to tidewater and revisiting the B.C. North Coast oil tanker ban.
Canada’s interest, which is “eternal and perpetual,” is in raising the standard of living for its people, a task that grows urgent as the gap in standards between this country and the U.S. widens. Policies, taxes and prohibitions for an imagined world undermine that goal.
It is a lesson driven home by the events of 2025, and one Canadians cannot forget in 2026 and the years to follow.
