anadian Prime Minister Justin Trudeau is leaving the political centre stage after facing mounting criticism on a variety of issues ranging from economic underperformance to incessant immigrant arrivals from all over the world, especially South Asia and the Middle East. Since his arrival in office in 2015, Prime Minister Trudeau has been credited with assembling one of the world’s most gender-balanced and diverse cabinets, introducing progressive policies such as legalisation of recreational cannabis use, carbon pricing, commitment to the Paris Climate Agreement, sizeable investment in green infrastructure, replacing NAFTA with CUSMA, and proactively responding to the refugee crisis in the Middle East and beyond.

However, Trudeau failed to control fiscal deficits and balance progressive spending with fiscal responsibility, leading some critics to argue that his shortcomings in effectively translating policy into sustained growth could be the main reason for the decline of his public approval ratings.

In Canadian politics, Conservative Party led by Pierre Poilievre has demonstrated significant political momentum, characterised by strategic electoral successes and enhanced public visibility. Notably, the party has secured victories in several by-elections, including critical gains in traditional Liberal strongholds such as Toronto-St Paul’s – held by Liberals since 1993 – and Cloverdale-Langley City. Throughout 2023 and early 2024, public opinion polling consistently reflected strong support for the Conservatives, often indicating substantial leads over their Liberal rivals.

However, this trajectory has recently encountered challenges following Trudeau’s resignation in January and the ascension of Mark Carney as Liberal Party leader last week. Carney began his distinguished career in the private sector, working internationally with Goldman Sachs in London, Tokyo, New York and Toronto. Transitioning to public service in Canada in the early 2000s, he quickly ascended to prominent roles, including deputy governor and subsequently governor of the Bank of Canada, notably during the global financial crisis. From 2013 to 2020, Carney served as the first non-British governor of the Bank of England, navigating significant economic turbulence following the Brexit referendum. Since leaving that position, he been the United Nations secretary general’s special envoy on climate action and finance, championing global initiatives in sustainability and climate policy.

Carney’s leadership has revitalised the Liberals, resulting in a reduction in the Conservatives’ polling advantage and fostering a more competitive political environment. After winning the Liberal Party leadership by securing 86 percent votes, Carney attacked US President Donald Trump for his tariff war against Canada and other countries. In his victory speech, he lambasted President Trump for “unjustified tariffs on what we build, on what we sell, on how we make a living.” He pointed out that President Trump was “attacking Canadian families, workers and businesses” and said that “we cannot let him succeed, and we won’t.”

Meanwhile, a Be Canadian, Buy Canadian nationalist drive that has taken Canadian retailers and intellectuals by surprise. Even before President Trump could enter the White House, his rhetoric of converting Canada into a 51st state of the United States of America had evoked stiff resistance from Canadian public. According to a survey conducted after the American elections, nationalism has surged in Canadians. The number of people saying they’re proud to be Canadian has jumped from 80 percent before elections to 86 percent in early March. Pride is highest among people aged 55 and over – at 92 percent – while 86 percent of people between the ages of 35 and 54 and 75 percent of people aged 18 to 34 said they were proud to be Canadian. Carney referred to this widespread sentiment when he argued, “I am grateful for how our provinces are stepping up to the fight. Because when we are united, we are Canada strong. Canada – America is not Canada, and Canada never, ever will be part of America in any way, shape or form.”

The fact is that Canada and the United States are one of the most connected pairs of economies in the world. The daily volume of the bilateral trade is about $2 billion. Prominent Canadian exports to the US include energy products, particularly oil, natural gas and electricity; automotive products, including vehicles and auto parts; forestry products such as lumber and paper; agricultural goods, notably grains, livestock, dairyand processed foods; and metals and minerals like aluminum and steel. In 2023, the volume of US-Canada trade was over $750 billion. More importantly, this trade is quite one-sided; 75 percent of Canadian exports end up in the United States. Now the US president has slapped a 25 percent additional tariff on the same. On March 10, President Trump raised the tariff on certain products by 50 percent. Canada has responded in a similar manner. However, in doing so, Canada has made a strategic choice. Its tariffs against the US products have been strategically implemented to target industries located predominantly in Republican-controlled regions and pivotal swing states, with the explicit objective of intensifying domestic political resistance to President Trump’s aggressive trade policies. Industries specifically selected for these tariffs include orange juice production in Florida, dairy and poultry sectors in Wisconsin and Georgia and bourbon distilleries in Kentucky. By focusing on sectors economically significant to key states supporting Trump’s administration, these measures seek to amplify internal political pressure, ultimately aiming to influence public opinion and electoral outcomes.

So far, America’s trading partners have responded to the tariff aggression in a tit-for-tat manner. Imposition of new tariffs by the United States has resulted in immediate reactions from the European Union and Canada.

Canadian exports to the United States result in over nine million jobs in the United States whereas they create just over two million jobs in Canada. The United States is Canada’s largest source of foreign direct investment (FDI). Conversely, Canada is a significant investor in the US economy. Significant infrastructure – such as pipelines, electrical grids, highways, railways and border crossings – supports the flow of goods, services and people, emphasising the practical connectedness of both economies. Given that this trade relationship is highly interdependent, economically vital and strategically indispensable to both nations, any tariff war will disrupt economic policies of both countries and will redefine North American economic future.

It is necessary to understand how tariffs work and what could be their immediate, short-term, medium-term, and long-term impact.

The Trump administration believes that for a long time, America has been losing its wealth to several countries in the name of globalisation. Donald Trump believes that this has resulted in relocation of American textile and manufacturing industries to Asia, thus helping other economies grow at the cost of American jobs. The Trump administration believes that tariffs are a powerful tool to revive domestic industries, regulate international trade and generate revenue. The application of tariffs is meant to make imported goods more expensive relative to domestically produced alternatives. Though Trump has not ruled out immediate economic consequences such as inflationary pressures – as increased import costs cascade through supply chains, raising the prices of consumer goods and intermediate products, he is sure America is going to gain huge benefits out of this shift in economic policy. He is not afraid of retaliatory actions by America’s trading partners. The Trump administration believes that it will lead to businesses restructuring supply chains to mitigate higher import costs, shifting procurement towards domestic or alternative foreign sources, thus benefitting American workers and families. Trump administration discredits any fear of diminishing incentives for efficiency and innovation. The economy team at White House believes that it is time to permanently reshape trade patterns, opening new opportunities for domestic producers and limiting global competition at the cost of bleeding US wealth. It is on account of these ideas that the Trump administration is waging a full scale tariff war against its largest trading partners including Canada and the European Union.

The tariffs on Canadian steel and aluminum will raise the prices for American consumers and manufacturers, potentially reducing demand for these products. Similarly, tariffs targeting Canadian lumber could cause short-term market displacement and revenue losses for Canadian companies. The persistence of tariffs would compel Canadian exporters to pursue alternative markets or adjust their supply chains. While diversifying markets could partially mitigate tariff-related impacts, the established infrastructure and deeply integrated nature of Canada-US supply chains make such adjustments challenging, costly and time-consuming. Over the long term, sustained tariffs could fundamentally alter Canada-US trade relations, prompting a restructuring of Canadian industrial strategies and investment patterns. Persistent trade barriers may compel Canadian producers to permanently shift production capabilities toward other markets, potentially weakening the integrated economic partnership that has historically benefited both countries.

So far, Americ’s trading partners have responded to the tariff actions in a tit-for-tat manner. Any new tariff from the United States has received an immediate reaction from the European Union and Canada alike. Coupled with geopolitical tensions in Russia-Ukraine war, it seems a whole new great reset in action. The United States is abandoning its traditional allies and seeking better relations with Russia. Contrary to several other countries in Europe where conservative nationalists are winning popular approval ratings in latest polls, in Canada it is liberals that, after facing several setbacks in recent years, have found a new enemy next door and are capitalising on a resurgent Canadian nationalism. This external pressure has bolstered nationalist sentiments among the Canadian electorate, inadvertently strengthening the Liberal Party’s position and constraining the Conservatives’ recent momentum. The latest polls indicate a closely contested race, with the Conservatives and Liberals nearly equal in voter support. These dynamics underscore the volatility of contemporary Canadian politics, wherein domestic electoral strategies and international geopolitical influences intersect. For the Conservatives to maintain their edge, careful navigation of both domestic policy concerns and Canada’s evolving relationship with the United States will be essential.

As Canada heads for new elections in the coming months, all eyes will be on the stiff competition between the conservatives supported by Donald Trump from across the border and a resurgent Liberal Party espousing a nationalist agenda. This electoral contest will not merely determine Canada’s internal political future; it will also serve as a referendum on Trump’s aggressive trade tactics and his attempts to reshape North American geopolitics. The Conservatives’ alignment—intentional or perceived—with Trump’s economic nationalism places them in a delicate position. Under Mark Carney’s leadership, the Liberals have successfully leveraged Trump’s controversial policies to energise the electorate around sovereignty and economic independence. Thus, the upcoming elections are poised to fundamentally shape the trajectory of Canada’s national identity, economic strategy and diplomatic relations with its powerful neighbour to the south.

The writer is a professor of government at Houston Community College, USA. He recently published his book The Rise of the Semi-Core: China, India, and Pakistan in the World-System. He can be approached at suklashari@gmail.com