The Trudeau tangle: Freeland’s exit, Khalistani hypocrisy, and Trump’s advantage

With Canada mired in internal discord, the country’s negotiating position in bilateral trade and economic discussions becomes markedly weaker

Canadian Prime Minister Justin Trudeau. AP

It would appear that Prime Minister Justin Trudeau’s political architecture, once heralded for its bright promise, is now in an ugly state of disrepair. Chrystia Freeland’s resignation as Finance Minister and Deputy Prime Minister is less a gentle bowing-out and more of a controlled demolition, complete with explicit warnings and meticulously chosen words.

“Upon reflection, I have concluded that the only honest and viable path is for me to resign from the cabinet,” she wrote in her public letter to Trudeau, effectively shattering the veneer of unity and exposing the deep cracks beneath. Forced into appointing his close friend Dominic LeBlanc as a rapid-fire replacement, Trudeau’s government now resembles a marionette show scrambling to replace snapped strings rather than a confident national administration. Meanwhile, the public is left asking whether the Prime Minister is presiding over a well-organized team or simply rearranging pawns on a chessboard that is about to be tipped over.

Within the Liberal caucus itself, doubt and disillusionment have bubbled over into open rebellion. Numerous MPs have audibly questioned Trudeau’s judgment and his grip on a situation that has spiraled from inconvenient to downright untenable. Freeland’s letter was an indictment of the government’s unsound economic direction and its inability to handle the geopolitical winds blowing in from Washington. “We need to take that threat extremely seriously,” she declared, referring to the incoming US administration’s promise of aggressive tariffs. “That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war.”

Her words serve as both a financial roadmap and a rebuke, highlighting the sense that the governing team has become more fixated on self-preservation and short-term electoral stunts than on the long-term leadership of the nation’s interests. “That means eschewing costly political gimmicks, which we can ill afford, and which make Canadians doubt that we recognize the gravity of the moment,” Freeland lamented—phrasing that leaves little room for plausible deniability on Trudeau’s part.

Freeland’s pointed reference to “eschewing costly political gimmicks” likely includes the GST holiday—an ostensibly consumer-friendly measure that, in economic terms, risks creating adverse second-order effects. Rather than providing durable relief, a short-term tax exemption can distort demand patterns, potentially accelerating demand-pull inflation in sectors like dining and hospitality. By boosting consumption without expanding productive capacity or improving supply chain efficiency, the measure intensifies inflationary pressures and complicates long-term price stability. The resulting mix of higher aggregate demand for non-essential services and negligible savings for grocery staples suggests the policy prioritizes optical victories over substantive, structural reforms.

However, Freeland too has a chequered record. While credited for initial stabilization efforts post-Covid-19—such as spearheading the national child-care program—Freeland oversaw persistent deficit spending that outpaced her own targets: the 2023-24 shortfall swelled to $61.9 billion, a full 50 per cent above the $40.1 billion limit she previously set. Her policies, including substantial industrial subsidies, failed to reverse Canada’s chronic underperformance in productivity growth and business investment. By enabling prolonged stimulus even after the Covid-19 shock subsided, Freeland’s approach potentially exacerbated demand-side pressures that coincided with a historic tightening cycle—interest rates jumping from 0.25 per cent to 5.0 per cent—thus compressing disposable incomes and dampening investor sentiment. Her strategies prioritized near-term political gains over structural improvements to competitiveness and fiscal resilience.

Adding to the government’s troubles, Jagmeet Singh, the leader of the New Democratic Party—whose support has been crucial in propping up Trudeau’s minority government—joined the chorus demanding the Prime Minister’s resignation. “He has to go,” Singh declared, signaling a loss of confidence that, under normal parliamentary conventions, might have been expected to prompt the NDP to formally withdraw their backing. Yet, instead of using his party’s leverage to bring the government down, Singh appears hesitant to take that final step, raising questions about the sincerity of his pronouncements. If the NDP truly views Trudeau’s leadership as untenable, why not withdraw the support that has allowed the Liberals to maintain their grip on power?

In the midst of this confusion, Trump’s mocking commentary—fuelled, perhaps, by a sense of personal vindication—serves as a stark reminder of Canada’s suddenly shaky standing on the world stage.

With Canada mired in internal discord, the country’s negotiating position in bilateral trade and economic discussions becomes markedly weaker. Instability at the highest echelons of power can disrupt policy continuity, impede timely decision-making, and decrease Canada’s credibility as a steadfast counterpart in resolving cross-border disputes.

From a tactical standpoint, Trump could leverage these Canadian weaknesses to secure more favourable terms in any forthcoming trade renegotiations. A fragmented Canadian government, anxious to stabilize domestic conditions and reassure jittery investors, may be compelled to accept disadvantageous concessions simply to avoid further economic turbulence. Such concessions could manifest in reduced tariffs on US goods, diminished resistance to American investment interests, or even a less assertive stance on contentious cross-border issues like softwood lumber or supply management in agriculture.

Thus, Canada’s diminished bargaining power grants the United States a strategic opening to reshape the economic relationship to its advantage, furthering an “America First” agenda at Canada’s expense.