The winner of Monday’s election will take office at a time when Canada is staring ahead at a number of urgent challenges. U.S. President Donald Trump’s trade war and the impact on Canada’s economy are chief among them, but that’s far from the end of the list.
The housing shortage remains acute and many Canadians have no access to a family doctor. The recent debates about the immigration system and a recent flood of temporary residents – and their impact on services – have not gone away, nor has the need to respond to the threat of climate change. Mr. Trump has pressured Canada to increase defence spending while his trade war has prompted calls for Canada’s military to be more self-sufficient. And the election campaign again exposed a growing regional divide that threatens national unity.
Here are the some of the biggest challenges facing the new government.
Trump
By Adrian Morrow
Since returning to office in January, U.S. President Donald Trump has threatened to annex Canada as his country’s “51st state,” imposed across-the-board tariffs, abruptly rolled those back, then reimposed a more targeted series of levies. It has all left Canada facing both the most serious threat from south of the border since the War of 1812 and the most punishing trade war in the country’s recent history.
Most immediately, Ottawa must handle the economic fallout from the President’s tariffs on key sectors, from cars to steel to aluminum. He has also threatened to enact more levies, including on auto parts, as soon as next month. There will almost certainly be a frantic diplomatic push – both directly aimed at the White House, and indirectly through free-trade-aligned U.S. politicians and business figures – to get the current protectionist measures rolled back and head off new ones. Also on the table: preparations for even more retaliatory tariffs on U.S. goods and, possibly, public support for industries getting hit.
In the mid-to-long-term, Canada’s new government will have to think through the country’s relationship with the U.S., given Mr. Trump’s determination to end the era of deepening economic co-operation and pull back on collective security guarantees for the world’s democratic alliance.
Lessening Canadian reliance on the U.S., however, will be hellishly complicated. It won’t be easy finding enough business opportunities around the world to significantly replace the consumption of Canada’s exports by the next-door behemoth. And no government in recent memory has shown much enthusiasm for increasing defence spending: 11 years after agreeing to NATO’s 2-per-cent-of-GDP threshold, Canada still hasn’t met it.
Central to every decision for the prime minister will be determining if and how to try placating Mr. Trump – or to simply refuse to concede anything, double down on the trade war and hope that such intransigence will press the U.S. to back off further.
The erratic President has made the second option more appealing by repeatedly changing his mind and moving the goalposts in negotiations. When he demanded Ottawa toughen border security last winter, then-prime minister Justin Trudeau complied, only for Mr. Trump to then increase his threats. Since then, the President has not laid out any concrete demands of Canada at all – short of annexation.
Mr. Trump has already upended Canadian politics. Where the Liberals once looked set to be steamrolled, the President’s threats suddenly made them competitive again with the Conservatives. And while the President may have defined this election campaign, he could very well have an even more definitive influence over Canada’s future economy, security and sovereignty.
Economy and tariffs
By Mark Rendell
Long before Mr. Trump began threatening to trash his neighbour’s economy and upend the global trading system, Canada was in for an economic reckoning. The country has experienced years of tepid economic growth (partially masked by a growing population); weak business investment; and deteriorating affordability, especially when it comes to housing.
Last year, Bank of Canada senior deputy governor Carolyn Rogers declared the country’s sluggish productivity – the amount of output per hour worked – a “break the glass” emergency. Unless it improves, she warned, wages will stagnate, inflation will become harder to manage and our standard of living will deteriorate. The incoming government needs to address these long-standing problems while also navigating Mr. Trump’s erratic trade war.
In the near-term, everything rests on U.S. trade policy. Canada has already gotten several lucky breaks. The U.S. imposed high tariffs on Canadian goods, but then offered an exemption for products that comply with the continental free-trade agreement, which covers the majority of exports. Canada also avoided the 10-per-cent baseline tariff the U.S. placed on most other countries in early April.
If the U.S. backs down on tariffs, the Canadian economy could still be in for a rough patch, as companies hold back on hiring and investment and consumers clutch their purses. But that likely wouldn’t lead to an outright recession, the Bank of Canada said in a report earlier this month. If, however, the trade war escalates, Canada could be looking at a year-long recession that leaves permanent scars on the economy, the bank warned.
Looking ahead, the next government will need to figure out where the country fits in a changing global order where the U.S. is no longer a trustworthy partner, and access to the massive market to the south isn’t guaranteed. That means trying to find new markets for Canadian goods. But it also means grappling with the fact that many of the country’s key industries – automobiles, oil and gas, and steel among them – can’t simply cut ship and run from the United States, said Peter Morrow, associate professor of economics at the University of Toronto.
“There are no easy outs,” he said.
Housing
By Alex Bozikovic
Remember the housing crisis? In the past five years, this issue increasingly dominated the Canadian political discourse at all levels. In the next term of government, it will likely return. The country’s structural shortage of housing and a decade of high immigration have created a mismatch that will get worse before it gets better.
What can the federal government do here? It can provide funding, alter the building code to make construction easier and build housing directly. Canada Mortgage and Housing Corp. (CMHC) estimates the country must double its current rate of building and construct 3.5 million more homes than is projected to be built over the next five years – just to bring housing affordability back to where it was in 2000.
This will be difficult, if not impossible. Today, the country builds about the same quantities of housing as it did in the early 1970s. The shortage is especially acute in B.C. and Ontario. The housing market in most of the country, meanwhile, is stalled owing to high prices, high taxes and Trumpian uncertainty.
Ottawa’s two major tools are capital and regulatory change. CMHC offers grants and loans for rental housing. These have been criticized as insufficiently flexible, and also for having vague metrics. Less onerous approvals will help get money out the door. Testing these programs against housing starts – not approvals, but actual construction – would measure their efficacy.
The feds also have control over the details of construction through the National Building Code. Here a quick fix is at hand: allow small apartment buildings to be constructed with a single staircase. That obscure detail would align Canada with most other countries, including all of Europe. It would make it much easier to build apartments on small lots, with more livable and efficient floorplans. Ottawa could make this happen tomorrow.
Finally, the federal government can build housing directly. Ottawa owns more than 600 underused urban sites across the country. The government could move this year to develop half-a-dozen social-housing projects on its own land. Social housing has never been a major presence in Canada; the present economic downturn provides an ideal opportunity for government intervention.
Climate and energy
By Adam Radwanski
Depending on whom one talks to, Canada has been falling short of its potential to be a global supplier of oil and gas, or a leader in the transition to low-carbon energy sources, or both.
On fossil fuels, notwithstanding the government-backed expansion of the Trans Mountain oil pipeline and imminent opening of the country’s first liquefied natural gas export terminal in B.C., there are widespread complaints about passing up opportunities to get more product to overseas markets in recent decades.
The imperative to reduce economic reliance on the United States will have the next government facing more pressure to get pipelines and other projects built, including by expediting permitting and regulatory processes perceived to have been an obstacle, and helping ensure buy-in from Indigenous communities.
However, it may also have to sort through which abandoned projects make economic sense to try to resurrect. For instance, while polls have shown a surge in support for a pipeline that would carry oil from Alberta to Atlantic Canada, there is no company proposing to build it, and there are questions about long-term oil demand in markets it would help reach.
Ottawa will also have to balance any push to increase fossil-fuel exports with Canada’s role in fighting climate change.
Although Canada’s greenhouse gas emissions have finally started to decline, the country is still not on pace to hit its international commitment of a 40-per-cent reduction from 2005 levels by 2030. That’s largely because emissions from oil and gas production have continued to rise.
Beyond environmental concerns, there will be economic pressure to make Canada more economically competitive in clean-technology industries.
In some cases, particularly when it comes to better capitalizing on large reserves of minerals used in electric-vehicle batteries, concerns about slow regulatory processes are similar to those with fossil fuels, and could be addressed in tandem.
But Ottawa will also have choices to make about how much to direct government resources toward other aspects of the energy transition for which Canada may have competitive advantages – including building the country’s supply of non-emitting electricity, and supporting emerging products or technologies such as geothermal, sustainable aviation fuel and carbon removal.
Mr. Trump’s hostility toward climate policy could lead to calls for Canada’s government to similarly deprioritize it. But as countries across Europe and Asia push harder toward decarbonization, there could also be danger in winding up on an island with the U.S. in resisting it.
Immigration
By Sara Mojtehedzadeh
Canada’s new prime minister will be confronted with the ripple effects of recent policy U-turns, including a significant reversal on temporary residence intake.
Temporary immigration streams are currently capped after years of increased reliance on migrant workers to staff a broad range of low-wage jobs – and on international students to fund postsecondary schools. That has left many temporary residents in limbo, and raised questions about how to fill stubborn gaps in the labour market. Meanwhile, long-standing complaints from workers advocates, who say temporary immigration programs are conducive to exploitation, remain largely unresolved.
Reduced permanent residency targets have also prompted concerns about economic growth. While cost-of-living issues – particularly housing pressures – have increasingly crept into the debate on immigration levels, policy makers will need to consider Canada’s aging population and its shrinking work force.
Bureaucratic challenges will also loom large: backlogs continue to dog the immigration ministry, despite recent improvements. (Job cuts at the department earlier this year could also jeopardize efforts to speed up wait times.) Meanwhile, the Immigration and Refugee Board has a whopping 281,000 undecided claims still pending, as migration driven by war and conflict abroad shows little promise of slowing.
But perhaps the thorniest challenge to Canada’s immigration landscape is developments south of the border. Border crossings have long been governed by a bilateral refugee treaty premised on both Canada and the U.S. being safe for asylum seekers. But Mr. Trump’s recent immigration crackdown – including a significant escalation in detention and rapid deportation – has prompted renewed criticism of the agreement. For Canada’s political leadership, the task will be to balance its legal obligations to refugees with an already-strained immigration system.
Illustration by Romain Lasser
Health care
By Kristy Kirkup
While millions of Canadians don’t have regular access to a primary-care provider, the issue did not figure prominently in the federal election campaign, including in the French and English language debates.
The problem comes down to staffing: Canada is suffering from a beleaguered health work force and health care organizations want the federal government to urgently address it.
The current picture is bleak. A Health Canada report published in February found the country needs tens of thousands of additional health care workers, including nearly 23,000 family physicians. The report also predicted the situation will only worsen in the next decade should action not be taken to address it.
Health organizations, including the Canadian Medical Association, have called on federal politicians to prioritize taking steps to see health care professionals added to address this deficit. This push is taking place at a time when more doctors south of the border are considering Canada amid concerns about the unpredictable political landscape and leadership of Mr. Trump.
The CMA said in a statement this month that Canada must act quickly to attract the American medical and scientific professionals who no longer feel valued in the U.S., which is seeing the elimination of health programs and research positions. It urged the federal government to take steps, including modernizing immigration policies to support hospitals, health authorities, provinces and territories recruiting health workers.
The next government also faces calls from pharmacare proponents to ink bilateral agreements for public coverage of diabetes medications and supplies, as well as contraceptives, with provinces and territories that have yet to reach agreements with Ottawa. Prior to the beginning of the election, Manitoba, B.C., PEI and Yukon all signed agreements with the federal government.
Health care organizations also want to see the next government ensure that virtual services are supported within the publicly funded health care system. This was discussed at a meeting of federal, provincial and territorial health ministers in January in Halifax.
Online health care access is expected to be the subject of an interpretation letter from the federal government on how services are covered under the Canada Health Act. The legislation, passed in 1984, established how health services can be covered when they are delivered by physicians and at hospitals.
In January, then-health minister Mark Holland said in a separate interpretation letter that nurse practitioners and other non-physician health professionals can bill the public health care system when providing primary care.
Defence
By Steven Chase
Canada’s military has suffered from decades of underinvestment that has hurt its operational readiness; its capacity to recruit and train soldiers, sailors and aviators; and its investment in equipment and infrastructure.
Canada is under pressure from allies, including the United States, to reach the 2-per-cent GDP NATO target for defence spending. Canada currently spends about 1.37 per cent, a relative laggard in the alliance.
“The fact that we have been viewed as wealthy shirkers has been a real problem in our relations with other key allies. It’s not just the Americans; Europeans and partners in Asia are pretty fed up with us as well,” said David Perry, president of the Canadian Global Affairs Institute.
Canada’s three biggest federal political parties have all pledged to boost spending to 2 per cent – which will require $18-billion more annually. The Liberals and Conservatives have pledged to meet this by 2030.
Canada has repeatedly encountered trouble buying new gear in a timely fashion – so much so that both the Liberals and Conservatives have promised solutions such as a stand-alone defence procurement agency or secretariat. “We have been trying to surge investment in the Canadian Armed Forces since at least 2017 and are still struggling because it hasn’t been much of a priority,” Mr. Perry said.
He said whoever wins the election will have to take a fundamentally different approach and convince senior civil servants, cabinet and the Treasury Board Secretariat, which oversees spending, to treat this as a priority file.
The Forces are currently understaffed, with a regular force that falls roughly 7,000 people short of its target for 71,500 regular forces and more than 6,800 short of the 30,000 target for primary reserve forces, according to numbers as of December, 2024. Under a directive issued last fall, the Forces also anticipate requiring a further 14,500 members to “implement current and future capabilities.”
Ottawa also faces a difficult decision about whether to lessen military co-operation with the United States given Mr. Trump’s talk of annexing Canada. Mr. Perry said this would be difficult because of how much Canada relies on the U.S. military. If Canada really wanted to eliminate its reliance on the Americans, it would need to spend 3 per cent or 4 per cent of GDP on defence, he said.
Unity
By Marcus Gee
The threats from Mr. Trump have brought Canadians together, producing a surge of flag-waving patriotic fervour, but does that mean the new prime minister can rest easy about the perennial issue of national unity? Not necessarily.
The separatist Parti Québécois is leading the polls in La belle province. It promises to hold a referendum on independence – Quebec’s third – in its first term if Quebeckers elect the party when they next cast their votes in 2026.
On the other hand, support for breaking away from the rest of Canada is the lowest it has been in years, dropping below 30 per cent in a recent survey. In the face of the Trump tariffs, and his persistent calls for Canada to join the United States, many Quebeckers are getting caught up in the patriotic wave. The proportion of Quebeckers who say they are proud to be Canadian now exceeds the figure in Alberta.
Which brings us to the prime minister’s other unity problem. Despite the Trump threats, a quarter of Albertans tell pollsters they would opt to take the province out of Confederation if the question were put to them in a referendum. A fifth of Saskatchewan residents feel the same way.
Alberta Premier Danielle Smith insists that her United Conservative Party backs a strong and sovereign Alberta within a united Canada, but also says that Ottawa should accede to a list of Alberta’s demands or face an “unprecedented national unity crisis.” Albertans, she says, are fed up with federal governments “repeatedly attacking our provincial economy and way of life.”
Flag waving aside, the newly elected PM will have his hands full calming the country’s divisions.