Deputy Prime Minister and Finance Minister Chrystia Freeland said the provinces and territories need to chip in to Canada's response to the U.S.'s Inflation Reduction Act, which includes electric-vehicle incentives that favour manufacturers in Canada and Mexico, as well as the U.S. 

Speaking after an in-person meeting with the provincial and territorial finance ministers in Toronto Friday, Freeland said the Act has created an economic opportunity that Canada needs to seize in order to have an outsized share of the clean economy of the century.

She said U.S. President Joe Biden's Inflation Reduction Act has changed the playing field when it comes to the global competition for capital.

"I cannot emphasize too strongly how much I believe that we need to seize the moment and build the clean economy of the 21st century," she said.

"This is a huge economic opportunity."

The incentives of the Act, which were already revised to include Canada and Mexico after originally focusing on the U.S., are now facing criticism from Europe about North American protectionism.

The investments needed for health care and for the transition to a clean economy are two big pressures on the federal budget, Freeland said.

She said it's clear that the federal government needs to invest in health care and reiterated the government's commitment to doing so but would not say whether she thinks the amount the provinces are asking for in increased health transfers is feasible.

Freeland said these pressures come at a time of a global economic slowdown which poses restraint on government spending.

Friday's meeting of the finance ministers comes at a tense time for many Canadian consumers, with inflation still running hot and interest rates much higher than they were a year ago.

The ministers also spoke with Bank of Canada governor Tiff Macklem Friday and discussed the economic outlook for Canada and the world, said Freeland.

"We're very aware of the uncertainty in the global economy right now," said Freeland. "Inflation is high and interest rates are high."

"Things are tough for a lot of Canadians and a lot of Canadian families today and at the federal level, this is a time of real fiscal constraint."

The Bank of Canada raised its key interest rate again last week, bringing it to 4.5 per cent, but signalled it's taking a pause to let the impact of its aggressive hiking cycle sink in.

The economy is showing signs of slowing, but inflation was still high at 6.3 per cent in December, with food prices in particular remaining elevated year over year.

Interest rates have put a damper on the housing market, sending prices and sales downward for months on end even as the cost of renting went up in 2022.

Meanwhile, the labour market has remained strong, with the unemployment rate nearing record lows in December at five per cent.

This report by The Canadian Press was first published Feb. 3, 2023.