“In trade, as in hockey, Canada will win” . These are the words of Canada’s new Prime Minister, Mark Carney as he took over the leadership of the Liberal Party from Justin Trudeau. Since January, Canada has been facing pressure from an unprecedented enemy (and former ally), the United States. Donald Trump has not only hit Canada with 25% tariffs on steel and aluminium but has also patronised Canada via social media referring to it as ‘our cherished 51st state’ of America. At a time of great turmoil in Canadian politics, two-term PM Justin Trudeau stepped down in the face of increased political pressure. It goes without saying that Canada is facing some exceptional challenges. This political turmoil begs the question, what is next for Canada and is it facing an existential threat from the US?
Trump is seemingly angling for an all-out trade war with its neighbours
Before the election took place in November, Trump had already made shocking declarations on Truth Social to make Canada the ‘51st State’ as well as take ownership of the Panama Canal and Greenland. Initially, most major news outlets viewed this through the lens of Trump being an impulsive communicator who wasn’t serious about these claims. However, within his first few days as president, he seemed to follow through on this hostility towards Canada by announcing 25% tariffs on imports. This was allegedly an attempt to force Canada’s hand in getting control of fentanyl and illegal migrants coming across the border. Through announcing a new border defence package, the then Prime Minister Justin Trudeau managed to temporarily delay Trump’s trade war. As Trump’s patience wore thin—presumably over a perceived Canadian slight—he announced the return of 25% tariffs on steel and aluminium. Canada responded with counter-tariffs, prompting Trump to threaten an increase to 50%. However, he has since backed down. Perhaps some of his braver advisors have recently informed him the 25% tariffs on Canadian steel and aluminium are poised to increase production costs across various U.S. manufacturing sectors, potentially slowing economic growth, and elevating inflation. Or perhaps it was the fact that his 10% tariffs on Canadian energy (alongside Mexico) would increase prices for American consumers as electricity flows through the transmission grid that spans the U.S.-Canada border. According to latest figures from the U.S. Energy Information Administration, in 2023, Canada exported $3.2 billion worth of electricity to the U.S., almost three times the amount the U.S. sent north [1]. With these tariffs coming into effect in early March, the next few months will reveal the scale of the economic impact on both countries as consumers grapple with this new hostile reality. Furthermore, the world will be watching to see how the new Prime Minister, Mark Carney will deal with this unprecedented trade war.
Who is Mark Carney?
On the 14th of March 2025, Mark Carney was sworn in as the new leader of the Liberal Party and subsequently, Canada’s new Prime Minister. He took over from Justin Trudeau, who has led the country since 2015. With Trudeau facing extremely low approval ratings and his deputy Prime Minister resigning over concerns regarding Trump’s tariffs, internal pressure ultimately prompted his resignation. Subsequently, a leadership race commenced between Carney and Chrystia Freeland who was Minister for Transport and Internal Trade under Trudeau. However, the victor, Mark Carney, is not much of a politician himself. He is, above all, an economist. He served as Governor for the Bank of Canada from 2008 to 2013, as well as Governor of the Bank of England from 2013 to 2020. Carney’s economic expertise can be viewed as a key asset in navigating Canada’s growing trade war, just as it was during the 2008 financial crisis when he led the Bank of Canada. However, Carney’s political inexperience might be to his detriment when the time comes for a general election. Populist leader of the Conservative Party, Pierre Poilievre is known to be highly skilled in communication tactics and well averse in the game of politics, leading the polls currently at 38.1%. However, Carney is hot on his heels at 35.9% [2]. Before Trudeau stepped down, Poilievre was comfortably leading the polls. However, as Canada clashes with the US, the Conservative Party’s mirroring of Trumpian style and talking points is becoming more unpalatable to the Canadian electorate. Could Carney defy the recent trend of incumbents losing elections, as seen in the U.S. and Portugal? Does Mark Carney’s fresh perspective, coming from the outside of the political world, equip him with the necessary skills to stand up to Trump, unite the Canadian people and hold onto power?
What does Canada’s future look like?
Whilst Trump’s 25% tariffs on Canadian steel and aluminium imports came into effect on the 12th March, for now, he has paused other tariffs on Canada and Mexico until 2nd April. Over the next few weeks, Canada’s new Prime Minister will have to wrestle with the choice to either submit to Trump’s trade war, and avoid risking further escalation and counter-tariffs, or stand firm in his opposition. The statements Carney has put out so far would more likely suggest the latter. He has vowed to keep Canadian counter-tariffs in place “until Americans show us respect” and has labelled the US as “a country we can no longer trust”. This suggests the coming weeks will bring increased hostilities and stakes for the economies of both nations. Not only this, but the nature of Western geopolitics may be permanently altered, as traditional allies of the US become increasingly isolated and resentful.
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