The federal government said on Thursday that it is slashing immigration levels for the first time in a decade, reducing the number of new permanent residents next year by 21 per cent, or 105,000 compared to its original target, in addition to deep cuts to targets for foreign temporary workers and students in the country. 

The news, first reported by the National Post, builds on previously announced restrictions to the temporary foreign workers’ program and the number of international students entering the country. It’s a sharp reversal from the steady immigration growth since the Liberals formed government in 2015, including an increase to boost the country’s post-pandemic recovery.

Since then, a near country-wide housing crisis and pressures on the health-care system have intensified. “As we emerged from the pandemic … we didn’t get the balance quite right,” Prime Minister Justin Trudeau said in a press conference.

The numbers: The government now plans to bring in 395,000 new permanent residents in 2025, down from 485,000 in 2024. By 2027, it will shrink by 25 per cent from this year’s levels. Temporary residents will decline to five per cent of the population by the end of 2026, down from about 7.3 per cent, or more than three million people, currently. The changes mean Canada’s population won’t grow at all for two years, compared to a 3.2 per cent increase in 2023, according to Statistics Canada.

An ‘overcorrection’: Some economists and business leaders have flagged that the changes are too drastic, and too fast. A Scotiabank report published days before the latest cuts warned that Ottawa was already heading toward an “over-correction,” and that it could pose a “substantial challenge to businesses.” The report notes that over a quarter of new jobs in Canada since 2021 have been filled by temporary residents. And Canada would need to maintain population growth of 0.85 per cent just to stay “productivity-neutral,” the bank’s economists estimated. That suggests Canada’s already low productivity would shrink as population stagnates under Ottawa’s new plan. 

“Whenever we have these big changes all of a sudden, it has major economic consequences,” said Dan Kelly, president and CEO of the Canadian Federation of Independent Business. 

Ripple effects: Kelly, who called the cuts “disappointing and harmful,” said service- and hospitality-business owners are most concerned about labour shortages and wage hikes. But Benjamin Bergen, president of the Council of Canadian Innovators (CCI), a tech industry lobby group, said reduced immigration levels could have an outsized impact on Canada’s tech and innovation companies. 

“I guarantee you the percentage of CCI CEOs who are immigrants is way higher than the percentage of immigrants in the overall population,” Bergen said in an email to The Logic. 

“Canada needs to stay wide open for the best and brightest,” he said, adding that the country should be ready to accept an influx of high-skilled workers in the event that presidential candidate Donald Trump is elected in November’s U.S. election. “The government’s fumbling of immigration shouldn’t slam the brakes on the companies that rely on this talent to drive prosperity and build globally competitive firms.”