By  Richard M. Sanders

    Canada’s elections are usually fought on domestic issues and inspire only modest interest outside its borders. This time, however, Canadians were caught in the maelstrom of Donald Trump’s wild talk and his push to wall the U.S. economy off from the world with high tariffs. Thus, the campaign attracted intense attention in the United States and elsewhere, becoming yet another front in the world’s struggle to deal with Trump’s boundless appetite for disruption.

    At the beginning of 2025, it appeared that the opposition Conservative Party, led by Pierre Poilievre, a sharp-tongued right-wing populist, was cruising to a solid majority in Parliament against the tired, unpopular Liberal government of Justin Trudeau. Then, the electoral momentum suddenly turned around. Trudeau, bowing to the inevitable, announced on January 6 that he would not run again. The Liberals coalesced around Mark Carney, a highly credentialed former central banker who had never run for elective office. Carney, although not a member of Parliament, took office in “caretaker” mode on March 14 and immediately announced an election to be held on April 28.

    All this played out as Donald Trump launched unprecedented attacks, both real and rhetorical, against Canada. He began by asserting that Canada should become the fifty-first American state rather than an independent country, a comment that he first made to Trudeau, who sought to brush it off as a joke. Nevertheless, Trump repeated the sentiment on multiple occasions, insisting that he meant it seriously. Trump and his team have also rehearsed a range of grievances, real or imagined, against Canada, even raising the prospect of revisiting agreements setting the two countries’ border. 

    This bullying touched as sensitive a nerve as exists in Canada. The reality is that as a country next to a neighbor ten times its size in population, speaking the same language (outside of Québec), and with deep security, economic, and cultural ties, Canada’s sovereignty has often felt a bit tentative. Historically, Canadians have been touchy about its potential infringement. 

    However, with the signature of the U.S.-Canada Free Trade Agreement in 1988 and its subsequent expansion to include Mexico in 1994, Canadians made an existential decision to link their fate to that of the United States. It is true that subsequently, there have been moments of tension, such as when then-Prime Minister Jacques Chrétien refused to join George W. Bush’s adventure in Iraq or when Barack Obama refused on environmental grounds to approve a pipeline that would have delivered heavy crude from Alberta to U.S. markets. However, overall, Canadians had grown comfortable with deep economic integration, and the shock of Trump’s cavalier dismissal of Canada’s identity as a nation hit them hard.

    And if Trump’s remarks about annexing Canada hurt Canadians’ psyche, their pocketbooks were threatened by his multiple announcements of new, high tariffs in violation of their free trade agreement (the latest version of which Trump himself had, in fact, renegotiated during his first term). These included 25 percent tariffs on steel and aluminum imports; at one point, it was announced that they would be extended across the board. Then, a series of changes in the tariff levels with which Canada would be hit, and temporary suspensions in implementation ensued. Currently, most tariffs are under a ninety-day suspension, which, in theory, ends on July 8. 

    The Trump-induced chaos upended Canada’s electoral scene. Prior to Trudeau’s departure, the Liberals, worn down after almost ten years in power, had been facing an electoral rout. But now, the election revolved around the question of who would be the best leader to deal with Trump. The choice of Carney seemed inspired as Canadians, stunned by Trump’s assault, took comfort in his glittering resume (degrees from Harvard and Oxford and service not only as head of the Bank of Canada but also of the Bank of England) and his “adult in the room” aura of calm competence which voters hoped would get their country through this utterly unforeseen crisis. 

    Poilievre, who had been opposition leader since 2022, had been prepared for a campaign centered on domestic problems—a sluggish economy, a housing shortage, concerns over immigration—for which he had offered hardcore conservative prescriptions. But now, he seemed to be missing the moment. Still worse for him, not only his policies but also his combative political persona reminded voters of Trump himself. His assertion that Canada is “broken” sounded like an echo of “Make America Great Again,” and his willingness to make personal attacks, such as calling Carney a “political grifter,” were all too Trumpian at a time when Trump was feared and loathed in Canada. 

    As the campaign went on, it appeared that Carney was on the way to a big majority in Parliament. But in the last two weeks, his support began to soften. When the election was over, the Liberals had won but stalled out at 168 seats, just short of the 172 needed to gain a majority, enough that they will remain in power as a minority government but will have to navigate tricky political waters—although no serious effort to force new elections is likely to come for a year to eighteen months. Ironically, Poilievre’s Conservatives, in fact, did fairly well, going from 119 seats to 144, but could not catch up to the Liberals, who took many seats from the two main smaller parties.

    Why did Carney fail to gain a majority? Whether intentionally or not, Trump had moved on from his gibes about making Canada the fifty-first state during the latter stages of the campaign (although he did return to it on the very last day). And as bond markets reacted poorly to his worldwide plans for high tariffs, he partially drew back from them, in the process keeping free trade arrangements with Canada and Mexico largely (although not wholly) intact for the time being. This gave Canadians some space to remember how tired they were with a decade of Liberal rule, allowing the Conservatives to win in some areas in which the Liberals had been gaining in the polls, such as the suburbs of Toronto.

Still, the race was impacted by Canada’s two smaller political parties, both of which did poorly. The New Democratic Party (NDP) was the big loser on election night, dropping from twenty-four to seven seats. It is a European-style social democratic formation, and thus an uneasy combination of labor union members and urban leftists of the sort that in the United States make up the progressive wing of the Democrats.

    Carney’s initial outsized levels of support included many NDP voters who were prepared to move to the Liberals to ensure that the Trump-adjacent Poilievre lost. And indeed, Carney’s Liberals garnered many NDP votes—but not all. It appears that Poilievre gained a fair number of votes from union members (as did Trump in 2020). In some districts, the Liberals and the NDP split the vote in ways that allowed the Conservatives to squeeze out victories.

    However, Carney heavily benefited from the poor performance of Canada’s other small party, the Bloc Québécois (BQ), which supports Quebec independence and seeks to defend what it perceives as Quebec’s interests in Canada’s Parliament (a separate Parti Québécois pushes the independence agenda at the provincial level).

    Given that the Conservatives have relatively little support within Quebec, their nationwide success always depends on the BQ holding down the Liberals in the province. But that was not to be the case in this election as it dropped from thirty-two to twenty-three seats. Carney’s anti-Trump message seemed to resonate particularly well there; the BQ had a bad election night. Carney owes Québec voters a lot for his success, even if he has not gained an outright majority in Parliament.

    Now that he has won, Carney has a tough job ahead of him. Inevitably, his top priority will be to figure out a strategy for dealing with Donald Trump. As prime minister, he will want to establish a personal relationship with the mercurial President. In that regard, he will benefit from simply not being Justin Trudeau, for whom Trump evidently had a visceral dislike. 

    It has been speculated that Carney, who has extensive experience not only as a central banker but in the world of Wall Street finance (he worked for investment banking powerhouse Goldman Sachs), maybe a more comfortable interlocutor for Trump. But one cannot count on a personal rapport to take him too far. 

    Trump divides the world’s leaders between those whom he considers to be his peers—heads of large, powerful states such as Russia, China, and India—and those who run smaller countries, who should recognize their subordinate positions and fall into line. Aside from whatever bad blood he had with Trudeau personally, Canada’s tough stance in the earlier renegotiation of the North American Free Trade Agreement seems to have particularly affronted him.

    Globally, a tense calm prevails for now during the ninety-day period in which the U.S. has limited its initial imposition of high tariffs to 10 percent worldwide (except for the very high tariffs imposed on China). Goods from Canada and Mexico covered by the free trade agreement are largely spared, with the exception of previously imposed tariffs on steel and aluminum. For now, Trump wants to concentrate on the biggest trading nations such as China, Japan, India, and the European Union. However, he may exaggerate how easy it will be to reach an agreement on terms that he favors. In the short term, the best outcome for Canada may be for Trump to focus elsewhere.

    However, sooner or later, Carney will have to negotiate with Trump. Later may be better for Canada if the U.S. sinks into a recession and Trump’s popularity falls further, weakening his position. There are some signs that he is already beginning to grudgingly recognize the political and economic cost of abruptly ending the integration of our economies, having announced some softening, at least temporarily, of the impact on the U.S. auto sector of those elements of his tariff hikes, such as those in steel and aluminum from Canada, which have not been suspended, together with a needed clarification on the rules of origin for auto parts.

    Carney stated that Canada would deal with Trump “on our own terms.” But his options are limited. The United States is the destination of 75 percent of Canada’s exports, while Canada only represents 17 percent of those of the United States. Canada has a free trade agreement with the European Union, but turning that into vastly increased exports or even joining the European Union, as some have suggested, would be challenging. Trump’s pressures have led to the renewed talk of building oil and gas pipelines to eastern Canada to enable shipment to Europe, something which Québec has always resisted on environmental grounds. But even if this idea can be revived, it would require a multi-year, multi-billion dollar effort. 

    Thus, Carney’s challenge will be to find a way to keep Canada’s exports flowing to the United States, its natural market. However, it is inevitable that even if Canada is spared from a wholesale dismantling of free trade within the continent, Trump’s negotiators will push for further Canadian concessions and resist any comparable ones on their part. Canada’s highly protected dairy sector, which survived the last renegotiation, is vulnerable, as is the softwood lumber industry, where U.S. firms have long disputed alleged Canadian subsidies to their producers, 

    However, such negotiations could entail domestic difficulties for Carney’s minority government. Dairy producers are especially strong in Québec, and Canada’s logging industry is highly unionized. Thus, the BQ and the NDP are likely to react negatively to any concessions in these areas. And when Carney embarks on any negotiations, he may find that yielding in these areas does not help him too much as Trump’s fundamental desire is not to expand America’s exports so much as it is to limit its imports.

    Of course, areas of friction between the United States and Canada extend beyond trade. Canada’s low defense spending has long been an American point of grievance. Canada’s elites seem to have accepted that more needs to be done, and Carney has pledged an “unprecedented acceleration.” However, it is not clear how the broader Canadian public will react when presented with the bill, as it has become accustomed to seeing defense spending as the “price of empire,” which is only for Americans to pay. 

    Border issues—immigration and drug smuggling—are also areas on which Trump has focused, despite the fact illegal entry from Canada to the United States is dwarfed by that coming from Mexico. While these non-trade issues add to the complexity of the relationship, they may also provide some opportunities for diplomacy, perhaps providing areas in which Trump can be given “the win” while shielding Canada’s core trade interests.

    The future of U.S.-Canadian relations will depend on tone as much as substance, given Trump’s mercurial nature. The tone, at least, has begun well, with Trump and Carney holding a telephone call. A visit to Washington is also planned. But should frictions arise, we could see Trump return to his abusive rhetoric, including his call for annexation. The challenge for Carney will be to avoid getting pulled into any unproductive mudslinging match without being seen as a patsy.

    And on substance, Trump’s basic policy views are hardwired. While it is almost impossible to divine his bottom line in any given negotiation, it is clear that globally, he wants as much protectionism as he can get away with. That said, he cannot be wholly indifferent to the realities of the stock and bond markets, of inflation rates, of public opinion polls, and of the options available to foreign countries. In this turbulent environment, Carney, who has his own domestic political concerns to contend with, will have to be both cautious and creative in charting a way forward.