Canada’s government wobbles (again)

Ever woken up on a Monday morning and thought, you know what? Screw this. Well, you’ve found company in Canada’s deputy prime minister and finance minister, Chrystia Freeland, who submitted her resignation just hours before she was set to deliver her regular fiscal and economic update yesterday (Monday) afternoon. 

What a move, eh? Finance ministers come and go (just ask Germany), so what makes Freeland’s resignation such a big deal? In a letter technically addressed to Prime Minister Justin Trudeau (but really to the world), Freeland laid out her case:

• She claims Trudeau was pushing her out of the finance job, and so rather than accept another role, Freeland resigned.
• But the real kicker was when she wrote, on Canadian letterhead, that she and her boss had been “at odds about the best path forward for Canada” for weeks.

At odds over what, you ask? There’s an official answer and an unofficial answer. For the official answer, Freeland effectively traces her decision back to some Trump tweets.

Here’s the timeline — 

• On Nov 25th, Trump announced his 25% tariff plan on Mexico and Canada until they beef up border security
• On Nov 29th, Trudeau flew down to Mar-a-Lago and dined with Trump
• On Dec 9th, Trump argued the US is ”subsidising” Canada to the tune of $100B per year (likely a reference to the ~$64B US trade deficit with Canada), and
• On Dec 10th,Trump mentioned the dinner on social media, jokingly calling Trudeau the “governor” of the “Great State of Canada”.

Any possible chuckles aside, alarm bells were already ringing in Canada, which sells 77% of its exports to the US. Sure, there were also surprise tariffs on Canada during Trump 1.0, but this time the stakes (like the threatened tariffs) are higher, as Canada grapples with stubborn unemployment and deficits, plus an unhappy electorate.

So in the weeks since that dinner, Trudeau, Freeland, and Canada’s ten provincial premiers have already huddled twice to craft a strategy, with leaks that Canada could respond with export taxes on uranium, oil, and potash (Canada is America’s top foreign supplier).

What’s any of this got to do with Freeland’s resignation?

The official reason (in her letter) is that she and Trudeau disagreed on how to respond:

• Freeland says she wanted to push back on “‘America First’ economic nationalism” and keep “our fiscal powder dry today, so we have the reserves we may need for a coming tariff war.”
• And she contrasts that with Trudeau’s response, which she describes as “costly political gimmicks” (a presumed reference to Trudeau’s temporary tax cuts plus his move to send USD175 each to 19 million Canadians next year).

The unofficial reason? There are a few:

• Critics say Freeland didn’t want to be associated with Canada’s (US) $43B budget deficit (delivered in her absence), which blew past her own guardrails by $15B —something she implicitly blames on Trudeau’s “costly political gimmicks” above.
• But she probably also didn’t want to be associated with Trudeau himself, whose approval is still languishing around 30% — he’s unpopular both for classic incumbent reasons (housing, cost of living, migration) but also Trudeau-specific reasons (critics say he’s weak, aloof, too progressive, etc). So he’s again now fending off calls to resign, and Freeland is a contender to replace him, though polling suggests their party is destined for wipe-out either way.

So what’s next for Trudeau?

He’s invited media to hear him speak at a separate event today (Tuesday).

So far, he’s apparently been saying he’ll take time to reflect on his future — but he said the same thing when his party colleagues called on him to resign back in October, only to then shrug it all off. At this stage, however, it’s hard to see that line working much longer.

INTRIGUE’S TAKE

So… a few Trump tweets just destabilised the government of an ally, neighbour, and major trading partner? That’s a remarkable sentence for us to type, and presumably for you to read. And it leaves us with three thoughts.

First, did this all happen because of Trump’s influence, or Canada’s political climate? We’d say a bit of both: Trudeau’s position was wobbly well before US election day, and Trump’s attention really brought the blowtorch.

Second, Canada’s budget contained some intriguing details, including an extra ~$1B for border security. There were no specifics, though the message to Trump was clear: Canada was listening to (if quietly disputing) his border concerns. That approach worked for Mexico, and might’ve worked for Canada too — except it’s been drowned out by the political drama above. Instead of a conciliatory tweet like he sent Mexico, Trump’s immediate response has been to describe Freeland’s behaviour as “toxic”.

Then third, maybe let’s add Canada to the near-complete list of G7 countries now dealing with varying degrees of domestic turmoil as our world gets more complicated.

Also worth noting:

• Bank of Canada chief Tiff Macklem has criticised Trump’s proposed tariffs, saying the G7 should “confront its shared economic security issues together.”
• Trudeau has now named his public safety minister and close childhood friend, Dominic LeBlanc, as finance minister. He’s also been trying to recruit Mark Carney, Canada’s highly regarded ex-central banker, to join his cabinet.
• Elections are due by late 2025, the same year Canada is due to host the G7. Conservative opposition leader Pierre Poilievre currently leads in the polls.