Canadian politics are, as of now, in a tremendously uncertain state of flux. Not only has our Prime Minister resigned, we are also being buffeted by a rising storm coming from the direction of our nearest neighbour and longtime ally, the United States.

Going into the fall, Prime Minister Justin Trudeau was facing declining approval ratings and the threat of his entire government collapsing. Having won a minority government in the 2021 election, Trudeau’s Liberals needed other parties’ support in order to govern. With the Bloc Québécois already gone and Trudeau’s polling numbers reaching Michael Ignatieff territory, the New Democratic Party (NDP) remained the last external bastion of support for Trudeau’s government. NDP leader Jagmeet Singh will (rather famously) qualify for his full government pension this month (February 2025), so once parliament was on its winter break he finally pulled the plug, saying on December 20th that the NDP would not support Trudeau at the next no-confidence vote in the new year. 

That wasn’t the end of it for Trudeau, however. He was already dealing with the fallout from the resignation of his finance minister, Chrystia Freeland, who wrote a scathing resignation letter on her way out accusing him of trying to buy off voters with “political gimmicks” and pinning the blame squarely on him for Canada’s current budget woes. Also facing increasing calls to step down from within his own party, Trudeau eventually pledged to resign, delivering the news in an address on January 6th. Trudeau is still our Prime Minister at the time of writing, as he will stay in the role until a new Liberal leader is chosen to replace him. 

Meanwhile, we are waiting for the inevitable federal election that is soon to come. Parliament is currently prorogued, meaning that it is out of session until at least March 24th (there is a pending challenge to the prorogation, however). There are a few possible paths once parliament returns; the Liberal government could be toppled in a no-confidence vote, triggering an election that could happen as soon as May, or the new Liberal leader may be able to placate some of the former coalition members, delaying the election until the fall. 

This federal government gamesmanship could not be coming at a worse time for Canada. As I write this, Donald Trump is getting sworn in as the 47th president of the United States, with nearly existential implications for Canada. Trump has been touting territorial expansion and trade protectionism as cornerstones of his new administration’s policies, even more so than in his first term. Trump’s implicit threats to use military force to achieve expansion objectives in Greenland and Panama are in direct violation of the rules-based order that the US themselves helped create, not that the US has ever followed their own rules. He has also threatened devastating tariffs on not only America’s adversaries, but allies as well. This has placed Canada squarely in the US’s crosshairs, with Trump threatening to make Canada the 51st state with so-called “economic force,” including universal 25% tariffs on Canadian goods. While Trump did not institute any tariffs on day one, they are still very much on the table. As of now, it looks like March is the likely time for the implementation of Trump’s first round of tariffs.

To justify his Canadian annexation agenda, Trump has made a number of claims about the US’s trade relationship with Canada. He has again pointed out that the US has a trade deficit with Canada, claiming that the US subsidizes Canada. He has accused former finance minister Crystia Freeland of being “toxic” in previous USMCA negotiations in his first term. Canada has indeed been rightfully accused of being too protective of certain industries in the past, such as our uncompetitive dairy industry. But in terms of being “subsidized” by the US? As Joe Biden would say, “I’ve never heard so much malarkey in my whole life.” 

First, trade deficits are not “subsidies.” They arise when a country imports more from another country than they export to that same country. This can be due to any number of factors, and isn’t inherently a bad thing. Especially in the US’s case, their many trade deficits are mostly due to the fact that they are just so rich. Relative to their major trading partners, especially Mexico and China but also Canada, the United States is much wealthier on average with significantly higher per-person productivity. The American consumer is famously unstoppable, and the ability to afford to buy foreign products is a good thing. It is therefore hard for the US to have a trade surplus with a given trading partner, because its citizens buy so much stuff. Just ask anyone who’s used Temu.

The specific nature of a trade deficit is also important to understand in order to assess the health of a given trade relationship. Trump often references the goods trade balance with Canada, but a more holistic measure is the goods and services trade balance; when accounting for services, the US’s trade deficit with Canada shrinks by almost half since they are a net exporter of services to Canada. The remaining deficit number ($40B USD) is almost entirely composed of oil exports from Canada to the US. Despite the post-2008 shale boom turning the US from an energy backwater to an energy superpower virtually overnight, the US still gets 60% of its crude oil imports from Canada. Again, it’s worth looking at why; American oil refining capacity is largely built around heavy crude oil (such as the type produced in the Alberta oil sands), not the lighter crude oil extracted from its own shale deposits. Unless the US begins a massive rebuild of their refining infrastructure, they will continue to import large amounts of oil from Canada. Many American jobs depend on it.

Trump has also mischaracterized where the burden of his tariffs will fall, repeatedly and falsely claiming that American businesses and consumers will not be impacted (while tacitly admitting that prices will rise more recently). Aside from increased costs for households and businesses, tariffs may reignite the post-COVID inflation that the Federal Reserve has worked so hard to tame. In the meantime, Canadian factories have been in overdrive since Q4, producing and exporting as many goods as possible in advance of tariffs taking effect. 

While Trump referring to Justin Trudeau as “governor” is undeniably hilarious, by now I find the “Canada should be the 51st state” narrative entirely unfunny. Despite what Fox News host Jesse Watters seems to believe, there are many reasons why Canada isn’t some natural expansion of American territory. Canada and the United States have entirely different histories, geographies, and people. We have never controlled meaningful amounts of each other’s territory for extended periods of time. And Canada has always had America’s back: 158 Canadian service members died in Afghanistan helping the US avenge 9/11, and Canadian equipment and personnel joined in the fight against the recent Los Angeles wildfires. As many “rah-rah” America types as there are in the US, we have plenty of patriotism up here too. We aren’t waiting for someone to swoop in and save us; while Canada undeniably has problems right now, we can and will fix them on our own.

Amidst non-existent federal leadership, it has fallen on provincial premiers to help push back against this inane American expansionism rhetoric. While I chuckled at Justin Trudeau’s social media post saying that there isn’t a “snowball’s chance in hell” of Canada joining the US, other political cast members have been getting down to brass tacks. Say what you want about Danielle Smith and Doug Ford (and I have), but the former met with Trump at Mar-a-Lago and the latter has ratcheted up the rhetoric and even threatened to cut off Ontario’s electricity exports to, and alcohol imports from, the US. While I’m frankly happy to see anyone standing up for Canada, our approach needs to get into much better shape fast if we are to meet the challenge of a second Trump term.

And the consequences of not meeting that challenge could not be higher. An average of 80% of Canadian exports are sent to the US, and if all of Trump’s proposed trade policies are implemented we could be looking at a catastrophic 2% hit to our real GDP and up to 400,000 job losses. This would worsen our ongoing productivity crisis, and severely constrain any fiscal leeway we have left. A bit further down the road, the USMCA is up for renegotiation; some concessions will likely be needed to appease Trump, which could have consequences for decades. 

In the background, the Liberal Party has already begun the selection process for their new leader to replace Trudeau. Despite many notable members declining to run, some recognizable faces have thrown their hats in the ring. Remember Chrystia Freeland? She has begun pitching herself as a tested Trump negotiator while vying for the position. Former Bank of Canada Governor Mark Carney has also announced his candidacy at the same time much of his former work on sustainable finance has come crumbling down. All of the candidates will need to walk a fine line similar to Kamala Harris when she took over Joe Biden’s campaign for the presidency; they’ll need to reaffirm their support for liberal values and causes while simultaneously distancing themselves from the deeply unpopular Trudeau government and its policies. The leadership vote will take place on March 9th.
Whoever the new Liberal leader ends up being, it’s likely a moot point. Pierre Poilievre and the Conservative Party have all the momentum and the poll numbers to back it up. While there’s a lot not to like about Poilievre (such as his constant railing against “elites” while he himself is a career politician), I’ve been genuinely intrigued and impressed by some of his policy proposals, including withholding funding from cities that fail to build dense housing near public transit stations. He also has a bit of undeniable swagger that our country is sorely lacking, so I’m willing to keep an open mind for now. With our country facing simultaneous domestic uncertainty and a whole new level of Trump spectacle next door, we as citizens must remain engaged and make our voices heard not only domestically, but internationally. As Doug Ford’s hat says: “Canada is not for sale.”