Donald Trump’s 25 per cent tariffs ignite new Canadian political crisis

Donald Trump’s threat of 25 per cent tariffs has ignited a political crisis in Canada, with finance minister Chrystia Freeland resigning and PM Justin Trudeau coming under new pressure to stand down.

Canadian Prime Minister Justin Trudeau and former deputy Chrystia Freeland don’t see eye-to-eye over Donald Trump’s tariff threats. Picture: AFP

Donald Trump’s threatened 25 per cent tariffs have helped precipitate a political crisis in Canada five weeks before his January 20 inauguration, revealing the potential for his economic agenda to sow deep apprehension – even among close allies of the US.

Canadian Prime Minister Justin Trudeau faces growing calls to step down amid fresh doubt over whether he can unify his Liberal Party colleagues and retain the support of the New Democratic Party in propping up his minority government.

On Monday (Tuesday AEDT) Chrystia Freeland, his deputy and finance minister, resigned just hours before the release of the government’s economic statement in a move that sent shockwaves through the political establishment.

Ms Freeland broke with Mr Trudeau on how best to respond to Mr Trump’s tariff threat, with the Prime Minister forced to replace her as finance minister with close political ally and friend Dominic Leblanc.

Canadian political insiders said the government had been left on life support, with the drama serving as a cautionary tale for countries grappling with the threat of the US president-elect’s economic agenda. It was unclear on Monday night whether Mr Trudeau might yet emerge as one of the first casualties of the Trump 2.0 era.

Mr Trudeau addressed an emergency caucus meeting on Monday night, also attended by Ms Freeland. But MPs would not say as they left whether the leader still enjoyed their majority support. Liberal MP Chad Collins said they were “not united”.

“There’s still a number of our members that want a change in leadership. I’m one of them,” he said. “I think the only path forward for us is to choose a new leader.”

Mr Trump responded to the Canadian crisis by posting on his Trust Social platform, taking digs at Mr Trudeau and Ms Freeland.

“The Great State of Canada is stunned as the Finance Minister resigns, or was fired, from her position by Governor Justin Trudeau,” he said.

“Her behavior was totally toxic, and not at all conducive to making deals which are good for the very unhappy citizens of Canada. She will not be missed!!!”

Conservative Opposition Leader Pierre Poilievre moved swiftly to escalate his demands for an ­immediate election, saying it would be “ideal” for Canadians to go to the polls “before the (US) president takes office or within the first week or two of his mandate”.

“Justin Trudeau has lost control. And yet he clings to power,” Mr Poilievre said.

“We cannot accept this kind of chaos, division (and) weakness while we are staring down the barrel of a 25 per cent tariff from our biggest trading partner and ally.”

NDP leader Jagmeet Singh also called on Mr Trudeau to ­resign, saying “all options” were on the table when pressed on whether he would support a no-confidence motion.

“He (Trudeau) has to go,” Mr Singh said.

Ms Freeland had clashed with Mr Trudeau over his proposed cost-of-living measures, including a two-month sales tax holiday and $C250 ($275) cheques for those earning less than $C150,000 a year – a measure expected to cost more than $C4.5bn.

In her damning public resignation letter, Ms Freeland made clear the threat of Mr Trump’s 25 per cent tariffs had brought to a head her differences with Mr Trudeau over economic policy and that he had lost confidence in her.

“On Friday, you told me you no longer want me to serve as your ­finance minister and offered me another position in the cabinet,” she said. “I have concluded that the only honest and viable path is for me to resign from the cabinet.

“For the past number of weeks, you and I have found ourselves at odds about the best path forward for Canada.

“Our country today faces a grave challenge. The incoming ­administration in the United States is pursuing a policy of aggressive economic nationalism, including a threat of 25 per cent tariffs.

“We need to take that threat extremely seriously.

“That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war.

“That means eschewing costly political gimmicks, which we can ill-afford and which make Canadians doubt that we recognise the gravity of the moment.”

Ms Freeland’s warning came as the 270-page autumn economic statement revealed that extra spending decisions totalling $C21.8bn had been taken since the 2024 budget – lifting the deficit to $C61.9bn.