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Canadian Prime Minister Justin Trudeau speaks after signing an infrastructure agreement in Montreal, December 16, 2016.
Trudeau’s Darkest Hour
This is Justin Trudeau’s darkest hour.
Even as he shuffles his Cabinet tomorrow, it will not shuffle his political future. This is the endgame.
Eventually, all successful politicians turn into Dorian Gray — gazing into the mirror and seeing a reflection of beauty they believe voters will find irresistible. All the while, however, somewhere under a parliamentary staircase, a portrait of their political face is being ravaged by time, scandal, and betrayal. That is the bargain leaders inevitably make as they fight to stay in power.
There was President Joe Biden earlier in the year, still seeing the reflection of a robust man ready to govern for another four years despite the fact that he couldn’t get through 40 minutes of a presidential debate. He had to be pried out of the presidential limo by the Jaws of Pelosi.
In 2015, former Conservative Prime Minister Stephen Harper thought he too saw another big election win in the mirror, but instead, insulated from reality inside his powerful prime minister’s office, he suffered a stunning defeat. The wheel of change is not partisan, but it is powerful.
Trudeau is now seeing the real portrait for the first time. After nine years in power, down 20 points in the polls, he has long refused to look, but his once trusted Finance Minister Chrystia Freeland just swiped the picture from under the stairs, waved it around publicly, and then lit it on fire.
It’s hard to imagine a more shambolic ending. Freeland was told by the PM — on a Zoom call, no less! —that she was going to be replaced as finance minister right after she presented the Fall Economic Statement (a kind of mini-budget in Canada) that would reveal the government blew past its own key deficit target by more than CA$20 billion. In other words, “Please wear this fiscal mess and let me move on to a new thing.”
How was that ever going to work? Naturally Freeland refused, but she didn’t simply quiet-quit and go gently into that good political night. Instead, just hours before she was set to deliver the FES, she chaos-quit with a controlled rage, rage-against-the-dying-of-light letter, dismissing Trudeau’s entire economic agenda as a self-serving “political gimmick.”
It blew the government apart.
It’s hard to declare winners and losers in this carnage, as everyone in the government is a casualty. The PM is now facing an open revolt by a growing number of MPs. Wayne Long, an outspoken Liberal, went on CTV’s ‘Power Play’ to say Trudeau is “delusional” and claimed that up to 40 MPS want him to resign, though that number has yet to be confirmed. Still, his sentiments were reflected in comments MPs told me, one saying bluntly, “I hope he announces he is stepping down.”
Freeland herself says she is running again, which basically kicked off the next leadership race, and she is likely the front-runner. But, as the saying goes, “The hand that wields the knife shall never wear the crown.” Freeland delivered four budgets for Trudeau, and even if she rightly fought back against the $1.6 billion goods and services tax holiday boondoggle, that hardly adds up to the over $20 billion overage on her own targets. If Canada is facing a fiscal reckoning and an angry electorate, isn’t Freeland as responsible as Trudeau? Would Canadians be able to disaggregate the two?
All this could not come at a worse time for Canada, now under direct threat from President-elect Donald Trump. He promises devastating 25% tariffs on Canada the day after he is inaugurated, and, with a hyena’s nose for weakness, he has persistently and publicly tormented Trudeau with the threat of making Canada the 51st state.
Pause on that for a second because it is unprecedented in Canadian-US history, unless you want to go back to … 1812, before Confederation. What started out as a Trump taunt is starting to look more like a Trump trial balloon. Trump’s son Eric has amplified the idea on social media, and now, on places like Fox News, taking over Canada is a topic of genuine debate.
With Trump, the first question is always: Do we take him literally, or seriously, or both?
And the lesson people have learned in the last eight years is: both.
Even as government officials have dismissed the threat as a joke, others are taking it seriously. Ontario Premier Doug Ford is showing up on American news programs defending Canada and threatening to cut off energy exports.
Trump trades in three currencies: power, fame, and loyalty. A lame duck leader of a foreign country who has only one of these three may come to Mar-a-Lago for dinner, but he might well end up on the menu.
The best hope Canada has is for the 35 state governors who depend on Canada as their top trading partner to act as de facto proxies for Canada, and push back against tariffs that will hurt their workers and economies.
Now what?
A few paths:
One, Trudeau stays and runs again after tomorrow’s Cabinet shuffle. There are no polls or signs that would suggest this is the most productive path, but, until he leaves, it has to be an option.
Two, Trudeau leaves, prorogues parliament, and the leadership race kicks off. The rules around that election will be crucial for the Liberal Party.
Can Liberals afford to take three months to elect a leader while Trump launches trade tariffs and the Conservatives consolidate their lead in the polls? It is not advisable.
On the other hand, can they afford to do a short 30-35-day process, in which case very few Canadian voters and new candidates will get involved? That might not end up injecting any fresh blood into the party at all. The Democrats tried it in the US and ended up with a frothy Kamala Harris campaign start and a miserable end.
There are few good options for the leader and the party right now, but if the government falls on a confidence motion in the new year, then the race is one with Trudeau at the helm, which is exactly what the opposition parties want most of all.
Nothing can happen until the prime minister decides what he will do.
It’s coming on Christmas, as Joni Mitchell once sang, the day the prime minister was born, but instead of seeing a star in the sky, even he knows this is his darkest political hour. The only guide he has might be those portraits of other prime ministers that hang in the halls of Parliament, each of whom has had to ask the same impossibly hard question: When is my time up?
Only a few of them got to choose their own answer.
FILE PHOTO: Canada's Prime Minister Justin Trudeau listens to Foreign Minister Chrystia Freeland during news conference in Ottawa, Ontario, Canada, May 31, 2018.
Is Trudeau about to take a walk in the snow?
Canadians might not be feeling quite so superior about dysfunctional American politics after watching this week’s fiasco in Ottawa unfold like an episode of “Veep.” The resignation on Monday of Chrystia Freeland, Canada’s finance minister and deputy prime minister, sparked the most chaotic day in Canadian politics in decades.
Freeland was due to deliver a mini-budget known as the fall economic statement at 4 p.m. Yet, at 9 a.m., the finance minister rocked the Canadian capital when she revealed she was quitting the Cabinet, disbanding the double act that has led Canada for much of the past nine years.
In a searing resignation letter, Prime Minister Justin Trudeau’s chief lieutenant and ally said that the country faces a grave challenge, with the incoming Trump administration threatening 25% tariffs on all Canadian exports to the US.
She said Canada needs to keep its fiscal powder dry and not spend it on “costly political gimmicks,” referring to the sales tax holiday and US$175 per person thinly veiled electoral bribe that Trudeau promised — against the better judgment of his finance minister and her department.
Most damaging of all, Freeland crystallized the nagging sense, felt by many people, that Trudeau is more focused on his own future than on that of everyday Canadians.
“They know when we are working for them, and they equally know when we are focused on ourselves,” she said.
Coming from someone who has worked so closely with the prime minister, it was devastating stuff, and it has left Trudeau badly wounded — perhaps fatally — as other dissidents in the ruling Liberal Cabinet and caucus consider their next move. One Liberal member of Parliament said between 40 and 50 of 153 caucus members actively want Trudeau to resign, a feeling that was strengthened after the party was trounced in a by-election in British Columbia on Monday.
Trudeau said he will take the Christmas break to consider his options, which appear limited. The left-leaning New Democratic Party has helped prop up the minority Liberal government, but its leader, Jagmeet Singh, has also called for the prime minister to resign.
When Parliament resumes in late January, Pierre Poilievre’s Conservative Party will seek to table a vote of no confidence in the government at the first opportunity, and it looks like it will have the votes in the House of Commons to send Canada to its 45th general election.
Freeland’s bombshell was designed to cause Trudeau maximum inconvenience.
Finance officials were forced to put the mini-budget on hold until they could determine who should deliver it.
Poilievre stood in the House of Commons during the daily question period and asked, “A question for the finance minister: Who are you?”
The government’s own order of precedence suggested the industry minister, François-Philippe Champagne, would assume the duties of finance minister, but he was unaware of that reality when confronted by journalists and is said to have refused to read out a document he had no role in drafting. The next person in line, Randy Boissonnault, was forced to resign from the Cabinet last month, adding to the tragicomic mood.
By the day’s end, Trudeau had persuaded the public safety minister, Dominic LeBlanc, to assume the role of finance minister, and he was sworn in in time to table the fall economic statement in the House of Commons.
It all felt like governing by improv, led by a prime minister in office but not in control. Nobody seems to have been more surprised than Trudeau by Freeland’s resignation, but he really should not have been. In her letter, Freeland said the prime minister told her last Friday that he no longer wanted her to serve as finance minister and offered her another position.
It has since been reported that in an hourlong Zoom call, he told her that she would be replaced as finance minister by former central banker Mark Carney; he asked her to be the point person for Canada-US relations but not as the minister of global affairs, a job held by Mélanie Joly. (Carney has not commented on his intentions, nor has he been named as Freeland’s successor.)
It is perhaps just as well for Canada that Freeland declined and offered her resignation.
The now-former finance minister is not popular with the incoming US president, a point Donald Trump made in a provocative post on social media late on Monday.
“The Great State of Canada is stunned as the finance minister resigns, or was fired, from her position by Governor Justin Trudeau. 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!!!,” Trump wrote.
Freeland attracted the president-elect’s ire during his first term in office, when she appeared on a panel at a summit in Toronto called “Taking on the Tyrant,” against a backdrop of a rogue’s gallery of autocrats, including Vladimir Putin, Recep Tayyip Erdogan, Bashar al-Assad and … Trump.
The then-president subsequently said, “We don’t like their representative [Freeland] very much.”
Trump’s reelection has proven to be the catalyst for the crisis that has hit the Canadian government. Trudeau and Freeland were simpatico for much of the government’s nine years in power — a free-spending Thelma and Louise, intent on pioneering feminist and social justice policies, even if they risked driving off a fiscal cliff (Canada’s debt has doubled under Trudeau).
But Trump’s threat of tariffs and his repeated references to Canada as the “51st state” have created existential panic in a country that sends three-quarters of its exports south of the border.
Trudeau and LeBlanc headed to Mar-a-Lago resort to pay tribute to the president-elect, only to be humiliated when it was leaked that Trump had said Trudeau could be governor if Canada joined the US as a state. If it was a joke, Canada isn’t laughing.
Trudeau has proven to be very New Testament in his approach to Trump, turning the other cheek, even while promising to retaliate to tariffs if necessary. More aggressive leadership has been assumed by a Trump-like, Old Testament, eye-for-an-eye politician, Ontario Premier Doug Ford. He has said that if Trump imposes sweeping tariffs, his province will suspend electricity exports to several northern states and block American alcohol sales to the Liquor Control Board of Ontario, the world’s largest alcohol purchaser.
Trump was at it again on Tuesday evening, saying “many” Canadians want Canada to become the 51st state because they would save on taxes. “I think it’s a great idea,” he said. His former security adviser John Bolton told the CBC that Canadians shouldn’t over-intellectualize the tweets. “I think he’s just mean” and is trying to humiliate Trudeau, Bolton said.
From Canada’s point of view, the most encouraging thing about the social media post Trump made after Freeland’s resignation was his mention that there may be a deal to be had. The president-elect has made clear his belief in tariffs, what he calls “the most beautiful word in the dictionary.”
He believes that the US is “subsidizing” Canada because it has a trade deficit that is largely the result of oil prices that have doubled in the past four years (60% of US crude imports come from north of the border). But the president-elect can’t ignore the belief held by two-thirds of Americans that his tariff plan will add to the rising cost of living.
Trump’s other concern is over porous borders in the north and south that are leaking migrants and fentanyl. However, as Canada’s ambassador in Washington, Kristen Hillman, pointed out, the 24,000 illegal migrants and 43 pounds of fentanyl intercepted at the northern border represent 0.6% and 0.2%, respectively, of the totals. Ottawa allocated an additional US$900 million for a “comprehensive” border security package in Monday’s fiscal update.
Canada has also indicated its willingness to be deputized in the trade war against China. The federal government said it will bring in more tariffs on Chinese solar products, critical minerals, semiconductors, and natural graphite, having already imposed 100% duties on Chinese electric vehicles and a 25% levy on steel and aluminum.
But it may be down to Ford and other provincial premiers like Alberta’s Danielle Smith to secure exemptions from the blanket tariffs Trump has promised.
It looks very likely that around the time Trump takes office, the ruling Liberal Party will be either embroiled in a messy leadership race or fighting a general election. In that case, the odds are that Trudeau, if he is still on the scene, will be too distracted to be an effective captain of Team Canada.
Canada's Prime Minister Justin Trudeau speaks during news conference with Foreign Minister Chrystia Freeland in Ottawa, Ontario, Canada, May 31, 2018.
Trouble in Freelandland?
There appears to be some tension behind the scenes between Prime Minister Justin Trudeau and his indispensable right-hand woman – Deputy Prime Minister and Finance Minister Chyrstia Freeland.
The trouble started on June 24, when the Liberals lost a by-election in what had been considered a safe Toronto seat. After the loss, rattled Liberals started to quietly suggest that Freeland, who represents the adjoining riding, should be replaced. On July 11, the Globe and Mail reported that senior people in Trudeau’s office were thinking of doing that. This resembled a leaked story that preceded the resignation of Trudeau’s last finance minister, Bill Morneau.
Trudeau is trying to recruit former Bank of England and Bank of Canada Governor Mark Carney, who may or may not be interested in Freeland’s job, which leaves her in an awkward position. On Sunday, Trudeau met with Carney to try to convince him to join the government, the Globe and Mail reported. Liberals hope Carney would be better able to communicate the government’s economic message, but some are skeptical about whether he would be anxious to climb onto what looks to be a sinking ship.
“The position looks like a poisoned chalice for Carney, who would be joining a deeply unpopular government that looks likely to be booted out of office at the next election,” said Eurasia Group analyst Graeme Thompson. “If he does take up the role of finance minister, it would likely be as a stepping stone towards a leadership campaign to replace Trudeau at the Liberal Party helm.”
Freeland, meanwhile, said Tuesday that she had a long conversation with Trudeau last Friday and that she still feels she enjoys his confidence. On Thursday, Labour Minister Seamus O’Regan was preparing to announce his departure, which means Trudeau will need to shuffle his cabinet. Trudeau is holding a cabinet meeting Friday as pressure mounts for him to show he has some kind of a plan for a comeback.
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland takes part in a press conference in Ottawa, Canada, on Jan. 29, 2024.
Canada’s threatened tax on tech giants risks trade war
Canadian Finance Minister Chrystia Freeland plans to unveil the federal budget on April 16, a release that will be keenly watched north and south of the border. Big Tech companies, in particular, will be looking for clues about when Canada will implement its long-promised digital services tax.
Justin Trudeau’s cash-strapped Liberal government hopes to raise up to $2.5 billion over five years by imposing a 3% tax on companies like Alphabet, Meta, Uber, Amazon, and Airbnb. First promised in the 2021 budget, the Trudeau government said it would implement the tax on Jan. 1, 2024, retroactive to 2022.
Aside from raising much-needed funds, targeting tech giants has the additional benefit for Trudeau of being popular politically. His government has already whacked Alphabet and Meta with its Online News Act, forcing them to share revenues with Canadian news publishers (Meta responded by removing news links from Facebook in Canada), and its Online Harms bill, which compels social media platforms to regulate harmful content or face punitive fines.
Freeland says the digital tax is a “matter of fairness,” given that tech giants have been booking their profits in low-tax jurisdictions.
A move by OECD countries to implement a global minimum corporate tax rate of 15% has gained traction, but US opposition persuaded a majority to vote for a year-long delay last summer. Freeland said she preferred a multilateral approach but that Canada is prepared to move forward alone.
US trade representative Katherine Tai has warned that the Biden administration considers the tax discriminatory and will retaliate with tariffs.
A letter from Senate Finance Committee chair Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho) in October said that any retaliatory steps would have bipartisan support.
Those threats seem to have registered with Freeland. In her fall economic statement, she removed the Jan. 1 deadline, while introducing legislation that would allow the federal government to implement the tax later. The budget may indicate whether Canada still plans to go it alone and risk Washington’s wrath, or wait for a new multilateral effort.
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland.
Will Trudeau’s digital services tax lead to trade dispute?
After all, US Ambassador David Cohen warned in July that if Canada introduces such a tax, his country would have “no choice but to take retaliatory measures in the trade context, potentially in the digital trade context.” Canadian Finance Minister Chrystia Freeland, no stranger to trade disputes with her American friends, appears determined to proceed.
"It's really a matter of fairness," she said. "There are other countries, our partners, who are today collecting DST. That DST is helping make essential investments in their countries, and it's just not fair for Canadians to be deprived of that revenue."
The Canadian argument is that tech companies collecting billions of dollars of revenue in Canada — like Netflix and Amazon — are able to shelter their profits in low-tax jurisdictions and are not contributing meaningfully to the economy. The Americans, unpersuaded by these arguments, don’t want to see Canada break from an OECD consensus, which is to wait until there is an international tax agreement. Business groups in both countries have asked Canada to hold off to avoid the uncertainty and disruption of a trade dispute.
The new legislation introducing the tax did not include a date, which means the government could implement it when it sees fit. Freeland may be hoping that it gives her leverage in trying to convince her American counterparts to accept the tax without imposing countervailing duties.
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks to journalists on Parliament Hill.
Expect a ‘big fight’ over digital service tax
The US ambassador has once again warned Canada that it should expect consequences if it proceeds with a plan to impose a digital service tax on the tech giants. David Cohen, in response to an audience question at a Canadian Club luncheon in Ottawa, signaled that it could get nasty.
“That will be an area of contention unless it is resolved," he said. “There’s a place where we’re either going to have to have agreement, or we’re going to have a big fight.”
Finance Minister Chrystia Freeland surprised observers, and her friends in the United States, when Canada refused to agree with other countries to delay adopting such a tax at a meeting of the OECD this summer, complaining that it had waited long enough.
The tax would impose a 3% levy on big tech firms — many of them American — that earn revenue from Canadian customers without paying tax in the country. It is scheduled to kick in on Jan. 1.
On Wednesday, Freeland said that after a recent trip to Washington, she was “cautiously optimistic” that she would reach a deal with the Americans and avoid a showdown.
Neither side would benefit from a high-profile dispute over the matter, so a face-saving compromise would be welcomed by both countries’ business communities, which have warned Freeland against forging ahead in the face of opposition from Washington and Silicon Valley. If a showdown has been averted, Freeland may reveal as much in her department’s Fall Economic Statement, due for release later this month.