Canada's most consequential election?
What comes next for PM Carney and his Liberal Government? My remarks to the Spanish Chamber of Commerce in Vancouver
Earlier this week, I had the pleasure of speaking to the Spanish Chamber of Commerce in Vancouver—an audience made up of business leaders, trade experts, and transatlantic optimists. They asked me to unpack what Canada’s recent federal election means for them. No small task.
I did my best to offer a strategic view of where things stand: what the election revealed about Canada’s political direction, how Mark Carney is reshaping the government, and what it all means for those doing business between Canada and Europe.
Below is a lightly edited version of my remarks. You’ll find some political analysis, some economic forecasting, and yes, a few thoughts on cheese tariffs. Because no matter how serious the times, it’s hard to talk about Canada-EU trade without lamenting our mediocre brie situation.
Enjoy the read—and as always, I welcome your reactions.
Hat-tip to my colleagues Andrew Percy, Sarina Rehal and Alex Wright for helping me avoid some key blind spots in my early drafts.
Introduction
Just a few weeks ago, Canadians went to the polls in what many, including myself, viewed as one of the most consequential elections in a generation.
My goal is to offer a strategic perspective on what this outcome means, not just for Canada domestically, but critically, for our economic future in a global context, and specifically for those of you doing business between Canada and Spain, and Canada and Europe.
I’ll start with political observations.
I’ll then explain how these impact businesses and the economy.
To close us out, I’ll outline what it means for all of us.
Let’s start with three political observations!
Key Election Outcomes and Dynamics
First, a tectonic shift—a shift in political geography.
The election saw a significant consolidation. Yes, the Conservatives posted their strongest popular vote share in a generation, but more remarkably, the Liberal Party under Mark Carney effectively collapsed the left-of-centre vote, resulting in a near-total collapse of the NDP, whose entire caucus now fits into a minivan.
Why does this matter? This has created a binary political map in English Canada – a dynamic the Conservatives will need to navigate as they seek to build a majority coalition in the future. And that means Pierre Poilievre needs to reach beyond his base into urban and suburban areas.
Second, a campaign of vibes, not policy. Voters chose who they trusted to manage a moment of uncertainty. Mr. Carney successfully projected calm, competence, and credibility, positioning himself as the "adult in the room" offering "change without chaos." He was not elected on specific policy ideas.
Why does this matter? Carney faces massive, undefined expectations beyond solving the “Trump” problem. His broad and diverse voter coalition likely has conflicting views on how to practically solve this problem. Expect cracks to emerge with time. The counter? Highly centralized decision-making. More on that shortly.
The third, conflicting dynamic: Canadians have given Prime Minister Carney a mandate for change, with ambiguity: There was a palpable desire for change after years of the previous government. Mark Carney captured this sentiment, but the specific nature of the desired change remains undefined beyond moving on from the Trudeau era and confronting global challenges.
This creates a complex mandate for the new government. Here’s what it means for businesses and the economy.
Implications for Business and the Economy
First, Carney vs. Trudeau: How different or similar? While Mr. Carney comes from the same party and continuity exists on social/climate issues, expect significant shifts in approach and emphasis, reflected in his cabinet.
I expect that with Mr. Carney’s background as a central banker and international financial expeirence, he will prioritize fiscal prudence, economic competitiveness, and solidifying Canada's position in the global economy — a stark contrast to Trudeau.
Expect a highly strategic, data-driven, and outcomes-oriented focus with a team built for this moment. He brought 15 new faces to cabinet and 10 new “secretaries of state” roles, a convention not used since the Harper government.
Decision-making will be more centralized, focusing power within the Prime Minister's Office to efficiently manage the diverse coalition he has assembled and respond quickly to international developments.
Carney is used to being a one-man show and will rely on the convening power of PMO and PCO to flex his muscles. The appointment of figures like Tim Hodgson, a former Goldman Sachs executive and long-time Carney advisor, to a key economic portfolio like Natural Resources, signals a deliberate shift in approach and expertise in certain areas, contrasting with the departure of long-time minister Jonathan Wilkinson.
Where will he apply this might and muscle?
On global challenges, starting with the US: Given Mr. Carney’s background and the geopolitical context, expect a strong focus on Canada's place in the world economy and navigating international risks.
The campaign quickly shifted from domestic cost-of-living issues to the larger economic threat from protectionism, particularly concerning the United States.
This isn't theoretical; it's impacting Canada now. Last week's Labour Force Survey offered a stark reminder of the challenge: over 30,000 manufacturing jobs lost in April, unemployment at 6.9%. The impact is acute in regions/industries exposed to US trade, like Windsor's auto sector (10.7% unemployment), linked to US tariffs. Steel and aluminum sectors are also feeling the pinch.
Economists forecast trade tensions and tariffs will weigh on the economy, pushing unemployment above 7%, leading to more job losses. Carney positioned himself as the crisis leader; a crisis is what he has.
Managing this critical file is front and centre for the new cabinet. Dominic LeBlanc, a seasoned minister, has been tapped to lead the crucial Canada-US relations portfolio, though Prime Minister Carney has made it clear he retains ultimate personal responsibility for the relationship with the White House.
And as we know, he plans to deal with the crisis by turning to Europe.
Carney is a natural ally for the EU and Spain.
For this audience, particularly those with ties to Spain and Europe, the election of Mark Carney likely represents a positive development in terms of strategic alignment.
His extensive international background signals a deep commitment to multilateralism, and the rules-based order for international trade. This makes him, and his government, a natural partner for the EU and countries like Spain.
We expect Prime Minister Carney to prioritize and seek to deepen established, rules-based relationships like the one with the European Union.
And that’s because he has said as much, openly discussing pivoting Canada’s trading relationships to deepen ties with partners like the UK and the EU.
Canadian negotiators are actively engaged in UK discussions. This desire to diversify transatlantic links aligns with Carney’s vision for a resilient economy.
The cornerstone with the EU is the Comprehensive Economic and Trade Agreement (CETA). Under provisional application since 2017, CETA delivered tangible results: 65% increase in merchandise trade, 73% increase in services trade.
However, for all the success under provisional application and the strategic desire for deeper ties, we must acknowledge the significant challenges that remain. CETA is not yet fully ratified, with 10 EU member states, including important partners like France and Italy, still needing to approve it. This partial ratification creates uncertainty for businesses and limits the ability to fully implement and update the agreement to reflect today's economic realities.
The reasons for this delay are complex but are largely rooted in domestic politics within EU member states, alongside broader trade skepticism and anti-globalization sentiments that have gained traction across Europe. Persistent opposition often has little to do directly with Canada and more with internal European dynamics.
And so, achieving full ratification is difficult; we need only look to the over seven years it took to get CETA to provisional application. And the headwinds, including the rise of populism across the EU, specific member state concerns on sensitive areas like agriculture, food standards, and geographical indications, mean any further deepening of trade agreements will face significant hurdles.
It also means we Canadians must continue to suffer with sub-par domestic cheese!
Truth is, we must all adapt to a new reality. Look at last week’s deal between the UK and the U.S. It’s not a trade deal, it’s a tariff deal.
It offers targeted relief for sectors like cars and steel in exchange for specific market access for US goods.
However, it does offer potential lessons for Prime Minister Carney:
Partial, pragmatic deals are possible but limited: Securing targeted relief for key industries suffering under tariffs can be a necessary step, even if a broader agreement is still a ways off. Carney may need to pursue a phased approach focusing on the most vulnerable sectors to stabilize the situation and buy time.
Reciprocity is key: The U.S. secured market access concessions. For Canada, achieving tariff reductions will likely require finding areas where Canada can offer increased access for U.S. exports, balancing Canadian interests across various sectors.
The process may be prolonged: Like the UK, Canada is unlikely to resolve its trade challenges with the U.S. in a single negotiation. Carney should anticipate a potentially lengthy process involving interim steps and ongoing engagement.
Because it’s not like Canada has much of a choice.
The biggest counter to the narrative that a pivot to the EU or UK can easily offset other trade challenges, or that Carney's election automatically solves Canada's trade future, is the overwhelming reality of Canada's economic integration with the United States.
For all the talk and warm words about deepening ties elsewhere, and for all the success we have seen under CETA, the US market fundamentally dominates Canada's trade landscape. Roughly 75% of Canadian exports go to the United States.
Consider this in comparison: when the UK left the EU, its trade was roughly evenly balanced 50% with the EU and 50% with the rest of the world. If people think Brexit was "bad" because of the frictions in trading relationships it created, then it is much, much worse for Canada to have unresolved and escalating trade issues with the United States. No deal with the EU, or any other partner, can ever replace the fundamental economic reality of the US market's importance to Canada.
This means that while strengthening ties with Spain and the EU is strategically important and welcomed, the resolution of the US friction is always going to be the most economically significant priority for any Canadian government, including Prime Minister Carney's.
The April jobs numbers underscore this urgency. If the Carney government is slow to engage or unable to strike a pragmatic deal with the United States, whether comprehensive or phased, we risk seeing these negative economic trends accelerate – more job losses, higher unemployment, and reduced confidence, potentially impacting investment decisions.
Why does this matter? For businesses, this means paying extremely close attention to shifts in trade policy and potential impacts on cross-border supply chains and market access.
And things are different this time. Regional differences are growing and putting national unity at risk.
Rising separatist sentiment, particularly in Western Canada, remains a significant undercurrent. If Western Canada feels ignored or disadvantaged by federal policies, particularly on resource development or trade (which, as we just discussed, are central to the US file), this alienation could escalate, leading to increased regionalism in regulatory matters and interprovincial relations.
A storm is coming and it will be destructive.
And so I come back to my earlier point. This is a government of change, but not necessarily stability.
In short, Canadians voted for both change and stability. While they got a change in leadership and a degree of continuity by re-electing the incumbent party, the path ahead is far from settled.
The inherent tensions within the governing coalition, the complexity and immediate economic impact of the Canada-US relationship, and persistent regional divides mean that the first year, in particular, is likely to be characterized by intense internal machinations and potentially unpredictable policy evolution.
What this means for you
With all of that said, what does this ultimately mean for you?
For those of you representing Spanish and European businesses, and Canadian businesses with ties to Spain and Europe, four things:
Pay attention to how the new government balances competing interests within its coalition, particularly on economic, fiscal, and environmental policies. The PMO will be the key center of gravity. Understand that while the broad Liberal framework remains, Carney's approach is expected to be more focused on economic strategy and international positioning.
Stay informed on the evolving Canada-US trade relationship and its potential ripple effects on global supply chains and market access. The recent job data highlights that this is not a distant concern, but a present reality impacting key sectors, and international examples like the UK deal offer clues to the potential path forward. While strengthening ties with the EU and UK is a priority and CETA has shown its value, the US relationship is paramount and its resolution is the most critical economic factor.
Engage strategically. Given the potential for volatility and personality-driven decision-making, strategic engagement with government stakeholders, both federally and provincially (including here in British Columbia), remains essential. Building relationships and understanding the nuances of the new power structures will be critical, particularly as the government grapples with the economic fallout of trade tensions and seeks to navigate complex international agreements.
Do not underestimate the importance of regional dynamics in Canada. Policies originating in Ottawa can have very different impacts and receive very different reactions across the country, especially when those policies touch upon trade and resources.
This was a consequential election, setting the stage for a period of significant adjustment in Canadian politics and policy.
While the broad strokes of continuity are present, the details of how this new government navigates its internal contradictions and, most importantly, confronts the immediate economic challenges posed by the US trade relationship, will shape the economic environment for the next two to five years.
It will be a period requiring careful observation, strategic planning, rapid response, and proactive engagement.