Features of Canadian Policy under “Mark Carney”

Amid an unprecedented crisis affecting Canadian-American relations, the Canadian Liberal Party took a step on March 9, 2025, by choosing an unelected technocrat with extensive experience in financial markets to replace Canadian Prime Minister Justin Trudeau as the party leader and Prime Minister. Mark Carney received overwhelming support from party members, garnering an approval rate of 85.9%. His rise to this position comes at a critical time in the Canadian political and economic landscape, following a decade of Trudeau’s rule that saw significant changes in domestic policies, sharp economic fluctuations, and important developments in foreign relations, especially in relations with the United States under the Trump administration.

Domestic Affairs

Carney faces major domestic economic challenges, including inflation, rising housing costs, and low productivity, which require strong fiscal policies. Issues related to immigration and climate action also require him to strike a balance between the economy and social justice. The following are the key domestic issues that Carney will face:

1. Restoring voter confidence in the Liberal Party: The Liberal Party suffered a severe political blow during Justin Trudeau’s tenure, resulting in the loss of its parliamentary majority, which poses an immediate challenge for Carney, especially since he does not hold a seat in Parliament. To overcome this obstacle, it is likely that he will call for federal elections shortly after taking office, where he will face the Conservative Party leader, Pierre Poilievre.

In his inauguration speech, Carney clearly identified two main adversaries before entering the election race: U.S. President Donald Trump and Conservative leader Pierre Poilievre. He launched a scathing attack, saying, “Trump believes he can weaken us by sowing divisions, while Poilievre’s plan will make our country vulnerable to such weakness; because those who worship Trump will kneel before him and not stand against him.” Therefore, Carney intends to exploit the prevailing perception among voters that Poilievre is ideologically linked to Trump, which is a factor that could weaken the Conservative leader’s position.

The evidence for this is that opinion polls indicate that Carney is seen as the best choice to confront Poilievre. Opinion polls previously showed the Conservative Party leading by more than 20 points over the Liberals, but the gap began to narrow since Trudeau’s resignation announcement and Trump’s hostile actions towards Canada. According to recent polls, most participants prefer Carney over Poilievre to lead the country in its negotiations with Trump.

Results of a recent poll conducted by Léger, a market research firm, show that the Conservatives are still leading the Liberals led by Carney by 41% to 33%. However, this represents a significant improvement for the Liberal Party compared to the end of last January, when the gap was 18 points in favor of the Conservatives.

2. Enhancing citizens’ economic conditions: The Canadian economy is experiencing a sharp slowdown, raising increasing concerns about citizens’ purchasing power, wage stagnation, and overall economic well-being. Rising inflation has led to an increase in the prices of basic goods, while housing prices continue to soar at unprecedented levels, alongside a decline in productivity. In this context, Carney will focus on stimulating investments, reducing the tax burden on the middle class, and implementing policies aimed at curbing inflation, especially since individual share of GDP has not improved since 2014. He has also committed to economic reforms, including reducing taxes on the middle class and reducing federal bureaucracy, which saw significant expansion during Trudeau’s tenure.

One of the major crises Canada is currently facing is the housing market crisis, where demand far exceeds supply, driving prices to exorbitant levels, especially in major cities. Carney has pledged to take decisive steps to address this crisis by accelerating the pace of housing construction through easing restrictions on the construction sector, increasing investments in affordable housing, and providing financial incentives to first-time homebuyers.

3. Implementing structural reforms in the Canadian economy: Carney emphasized the importance of accelerating the implementation of a set of structural reforms to the Canadian economy, stating his commitment to implementing a comprehensive program for infrastructure development, saying, “By speeding up the decision-making process regarding major projects, Canada will be able to reduce costs, attract more investments, create new job opportunities, and enhance its economic position within the Group of Seven.”

As an expert in monetary policy, Carney emphasized that some external factors, such as the identity of the U.S. President, could impact the Canadian economy, but he also emphasized that Canada is still capable of charting its own economic path, explaining, “Through my long experience in managing crises, I have realized that having a clear plan is always the best option compared to having no plan at all.” It is also expected that his policies will focus on supporting small and medium-sized enterprises, and promoting innovative industries, such as technology, clean energy, and advanced manufacturing.

4. Promoting sustainable development and energy policy: As a strong advocate for investment in clean energy, Carney is expected to lead Canada towards increasing reliance on renewable energy sources and sustainable development. While affirming his commitment to reducing carbon emissions, Carney proposes reviewing environmental legislation to promote innovation and increase private sector participation in developing clean energy solutions. He intends to review some environmental policies, including eliminating the carbon tax imposed by Prime Minister Justin Trudeau, which faced widespread criticism, citing its lack of proven effectiveness. Carney plans to replace it with a more complex system, along with a “carbon border adjustment mechanism,” which is likely to raise disputes with the United States.

It is likely that one of his first decisions as Prime Minister will be to reduce the controversial pollution tax, which was implemented in 2018 and previously defended. Despite The Guardian describing this tax as a positive step to provide quarterly tax reductions for taxpayers, the Conservative opposition, led by Pierre Poilievre, linked it to the rising cost-of-living crisis in Canada, prompting them to promote the “Axe the Tax” campaign.

5. Managing the immigration and labor market file: Canada has always relied on immigration to support its economic growth, being one of the countries with the highest rates of immigrant intake. However, the rapid increase in the number of immigrants in recent years has put additional pressure on infrastructure, particularly in the areas of housing and healthcare. In this context, Carney intends to adopt a more regulated approach to immigration, announcing that he will set a cap on it to return to pre-pandemic levels, ensuring it aligns with labor market needs and prevents further pressure on public services. It is also expected that his policies will focus on attracting skilled labor to address labor shortages in vital sectors, such as healthcare, technology, and manufacturing.
6. Possibility of pushing towards de-dollarization: During his tenure as Governor of the Bank of England, Mark Carney supported efforts to reduce the global banks’ reliance on the U.S. dollar as a primary reserve currency. He suggested the possibility of replacing it with the Chinese renminbi or a global digital currency supported by a broad international group, indicating that such a move could reduce the dollar’s dominance in global trade, thereby reducing the impact of U.S. economic shocks on the global economy through exchange rates.

However, if Carney pursues a similar approach as Prime Minister, he is expected to face greater confrontation with U.S. President Donald Trump, who previously threatened to impose a 100% tariff on BRICS countries in response to their proposal to establish an alternative currency to the dollar.

External Balance

On the international stage, Carney will have to navigate the complexities of the relationship with the United States, especially under Trump’s protectionist policies and economic threats. Additionally, enhancing relations with Europe and Asia will be essential for diversifying trade and increasing Canada’s diplomatic influence, as reflected in the following aspects:

1. Managing trade disputes with the United States: The economic relationship with the United States represents one of the major challenges Carney will face. Trump’s protectionist policies, including tariffs, pose a direct threat to Canadian exports in vital sectors such as automobiles, energy, and agriculture. To address this, Carney proposed a dual approach: first, renegotiating trade terms with Washington, and second, enhancing Canada’s ability to impose retaliatory tariffs when necessary.

In the same context, Carney affirmed his support for the retaliatory tariffs imposed by Canada in response to U.S. policies, indicating that his government will continue to take such measures until Canada receives fair treatment. He also emphasized that his country will not allow Trump to undermine its economic interests, and proposed plans to impose further tariffs on U.S. goods and use the revenues to support Canadian companies and workers affected. However, Carney also expressed his desire to negotiate a free and fair trade agreement between the two countries, with the aim of resolving all trade disputes between them.

2. Countering U.S. threats regarding annexation of Canada: Amid statements made by the U.S. President regarding the possibility of annexing Canada as the 51st American state, which sparked widespread controversy, while former Prime Minister Justin Trudeau tried to reassure Canadians with an optimistic message, he also did not hide the fact that his country faces an “existential challenge” from its southern neighbor, pointing to the danger of those threats emanating from Trump.

In his acceptance speech, Mark Carney delivered a strong message to party supporters, stating clearly, “America is not Canada, and Canada will never be a part of America in any form,” in a direct response to Trump’s repeated threats regarding the annexation of Canada, adding in a determined tone, “We did not choose this confrontation, but Canadians are always ready when challenged by others.”

3. Developing relations with European countries: The news of Carney’s victory was seen as a positive development for Europe in the near term, thanks to his close ties with European financial institutions. Therefore, Carney is expected to prioritize expanding economic and diplomatic relations between Canada on one hand, and the European Union and the United Kingdom on the other. Carney is a highly respected figure at the Atlantic level, especially after spending a significant part of the past decade in Europe, as well as his tenure as Governor of the Bank of England in 2013, being the first non-British person to hold that position, which provides him with extensive experience that he can leverage to enhance trade opportunities following the UK’s exit from the European Union, in addition to promoting investments in the financial sector and cooperation in climate change policies.
4. Continuing support for Ukraine: Due to the nature of his previous positions, Carney did not extensively speak about Ukraine. However, he praised their exceptional bravery in resisting the Russian attack on social media and reiterated that “Canada is a steadfast ally of Ukraine.” During his campaign for Liberal Party leadership, he also expressed support for Ukraine’s future membership in both the European Union and NATO.
5. Improving relations with India: Carney expressed his desire to improve relations with India, which saw significant tension during Trudeau’s tenure, aiming through his policy to diversify Canada’s trade partnerships, including enhancing cooperation with New Delhi. In a media interview in Calgary before his election, Carney discussed the issue of U.S. tariffs on Canada, emphasizing the importance and necessity of “diversifying trade relations with countries that share similar orientations,” mentioning in this context the opportunity to rebuild relations with India.

On its part, New Delhi may welcome any initiative to repair bilateral relations, especially in light of the impact of Trump’s threats to impose tariffs on both countries. India, which considers Canada a major destination for its migrants, may pressure the new government to make changes to immigration and visa policies.

6. Adopting a balanced approach in dealing with China: Despite the tension in relations between Ottawa and Beijing due to the close alliance between Canada and Washington, the Chinese Foreign Ministry expressed its congratulations to Mark Carney after his victory in leading the Liberal Party, expressing hope that relations between the two countries would see significant improvement during his tenure, even if it is short. The spokesperson for the Chinese Foreign Ministry, Mao Ning, stated that her country believes in the necessity of building bilateral relations on the basis of “mutual respect and shared interests,” calling on the new Canadian government to adopt a more positive policy towards her country.

China is also seeking to exploit the hostility shown by Trump towards Canada to improve its relations with Ottawa, and therefore it is likely that Carney will adopt a pragmatic policy that balances protecting Canada’s national interests and enhancing trade and economic cooperation with China, especially since any confrontation with two of Ottawa’s largest trading partners could negatively impact the struggling Canadian economy.

7. Commitment to security commitments with traditional allies: Data indicates that Carney plans to adopt an active security policy, focusing on enhancing Canada’s defense capabilities, strengthening cooperation with key allies, and preparing to confront regional and international security challenges. In an interview with the Canadian Broadcasting Corporation (CBC), Carney emphasized the importance of increasing military spending to strengthen the Canadian Armed Forces, in line with the increasing challenges.

According to analyses by the Atlantic Council, despite the trade and political disputes between them, Carney is expected to seek to deepen defense and security cooperation with the United States, including updating joint defense agreements and addressing shared threats. On the other hand, according to a report by The Economist, Carney expressed readiness to confront emerging security challenges, including dealing firmly with any hostile policies that may emanate from the administration of U.S. President Donald Trump.

In conclusion, Mark Carney’s tenure as Prime Minister represents a mix of opportunities and challenges. Domestically, he will have to deal with economic challenges. On the international level, he will face diplomatic complexities, especially amid escalating tensions with the United States, alongside the need to rebuild relations with key partners such as the European Union, India, and China. Therefore, Carney’s ability to secure Canada’s position on the international stage and maintain its economic stability will depend on his success in managing these issues, not to mention that his performance in handling these files will determine his political future and his party’s chances of remaining in power in the upcoming elections.