With Donald Trump returning to the White House next year, Canadian Prime Minister Justin Trudeau faces significant economic and political hurdles. Trump’s presidency could lead to renewed trade disputes, which threaten to push Canada into a recession, as 75% of Canadian exports go to the United States. Analysts warn of potential economic instability, migration issues, and further diplomatic challenges, complicating Trudeau’s already turbulent leadership.
Economic Uncertainty and Rising Trade Tensions
Trump’s re-election poses a renewed threat to the Canadian economy, particularly due to his plans to renegotiate the US-Mexico-Canada Agreement (USMCA) in 2026 and his promise to implement a 10% tariff on all imports. Given Canada’s reliance on the U.S. market, these changes could have severe consequences for industries such as crude oil, of which Canada is the fourth-largest producer globally.
Laura Dawson from the Future Borders Coalition expressed concerns over investor confidence in Canada, emphasizing that four more years under Trump could mean a prolonged economic struggle for America’s northern neighbour. The Canadian Chamber of Commerce echoed these concerns, predicting a potential 0.9% annual decrease in real income, accompanied by a decline in labour productivity.
A Return of Diplomatic Frictions
Trump and Trudeau have had a fraught history, with the U.S. president previously calling Trudeau a “far-left lunatic” and branding him as “very dishonest and weak” after a 2018 G7 summit in Quebec. Despite past friction, Trudeau extended an olive branch by congratulating Trump and reaffirming the importance of bilateral relations. He stated that he looked forward to working together for “opportunity, prosperity, and security” for both nations.
However, Trudeau also privately acknowledged that another Trump term would be far more challenging. “A step back,” he called it in January, indicating his apprehension regarding the implications for Canadian interests. Finance Minister Chrystia Freeland attempted to reassure Canadians that despite fears, the government would navigate any difficulties, highlighting their “strong relationship with President Trump and his team.”
Economic Challenges Amid Domestic Pressure
Canada’s economy has been struggling amid rising costs of living and economic stagnation, with these issues expected to dominate the upcoming election, which must be held within the next year. Polls indicate that Trudeau is vulnerable, and likely to lose to his Conservative opponent if trends continue. Analysts at Desjardins Economics predict that Trump’s policies could lead to a 1.7% reduction in Canadian GDP by 2028 compared to a scenario where a Democrat held office.
David Doyle, Macquarie’s head of economics for the Americas, warned that Trump’s protectionist policies could induce a recession in Canada. “It is a recession-inducing event because it’s on such an enormous scale,” Doyle said, stressing that such economic shocks have not been seen for a century.
Impact on Migration and Social System
A potential Trump-led crackdown on illegal immigration in the United States could also lead to increased pressures on Canada. Former Canadian immigration minister Jason Kenney warned of a “huge flood” of asylum seekers heading north if Trump follows through on his promises. “We could have a true crisis in terms of homelessness and pressure on our social system just months away,” Kenney cautioned. The prospect of a surge in migrants could significantly strain Canada’s social services and infrastructure, adding to the pressures faced by Trudeau.
International Isolation and Rising Defense Demands
Trump’s victory could also lead to a more fractured global landscape, with the United States and Europe potentially forming hostile, competing blocs. This shift could leave Canada diplomatically isolated, forcing it to take sides in a polarized world order. Kim Richard Nossal, a professor of politics at Queen’s University, emphasized the dramatic implications for Canada, predicting that Trump would press Ottawa to increase its defence spending.
Trudeau’s government may find itself squeezed between meeting U.S. demands and maintaining an independent foreign policy. As Trump continues to shift towards an America-first strategy, Trudeau will have to walk a diplomatic tightrope, balancing Canada’s international alliances while securing economic stability.
A Tumultuous Road Ahead
As Canada faces an upcoming election, Trudeau’s leadership will be tested by both domestic challenges and new external pressures posed by Trump’s return to power. With the potential for recession, heightened trade tensions, migration pressures, and diplomatic isolation, Trudeau must carefully navigate the road ahead to maintain stability and ensure prosperity for Canadians. Whether Canada can withstand another Trump administration without major economic and social disruptions remains a pressing question for the country and its leader.