These are the economic challenges Canada’s next Prime Minister must tackle first

Canada’s new prime minister will have to contend with an economy that is on shaky ground, a restless and uncooperative neighbour, a need to expand trade and resource options, and more. Photo by Twitserphoto/Getty Images/Postmedia files

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Canadians went to the polls on Monday to elect a new government, a vote held against the unprecedented backdrop of an uncertain economic relationship with the United States. Whoever wins will have their work cut out for them, but the following five challenges will be high on the priority list.

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Deal with Trump 

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First order of business for Canada’s next leader will be working out a deal with U.S. President Donald Trump on trade. Trump has already slapped tariffs on Canadian steel and aluminum, as well as the auto sector. While other exports in compliance with the Canada-United States-Mexico Agreement (CUSMA) are currently exempted, it’s not clear how long that will last. Complicating matters, Trump has revived his “51st state” threats and the U.S. has made it clear that it expects allies to pick up more of the tab for defence, meaning trade and security talks are likely to be intertwined. Trump will be looking for concessions including in the Canadian auto manufacturing, Canada’s supply management system and the digital sales tax. However, Canada remains a critical source of goods such as energy, critical minerals, potash and auto parts that the U.S. can’t live without, despite the president’s claims. The new prime minister will have to drive a hard bargain, while also attempting to save the remnants of the U.S.-Canada trade relationship. 

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Expand trade options 

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Over the past four months, the U.S. has reshaped its trading relationship with the world. While this poses a threat to the global economic outlook, it also represents an opportunity for Canada to build better trade relationships with other countries. Canada currently has 15 free trade agreements globally, including the Comprehensive and Economic Trade Agreement (CETA) with Europe and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Asia. While Canadian businesses could take advantage of these existing deals, the expansion into new markets is often a long process. Canada’s new prime minister will have to make trade diversification a key priority.  

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Accelerate resource development 

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Pipelines were one of the dominant issues on the campaign trail, as Trump’s trade threats brought new urgency to the need for both energy self-reliance and access to new global markets. Support for pipelines has increased among the Canadian public, including for a west-east pipeline that has raised hopes in the West that the approval process for energy-related infrastructure projects will finally be accelerated. Alberta Premier Danielle Smith laid out a list of demands to avoid a national unity crisis during her first meeting with Prime Minister Mark Carney last month, including cross-boundary access for pipelines and the end to the emissions cap on oil and gas. Whoever emerges as prime minister will have to navigate those high expectations and the competing interests of numerous stakeholders involved in any major project decision. Encouraging the development of Canada’s vast critical mineral deposits will be another crucial task for the next prime minister.

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Grow the economy 

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Canada’s economy is about to hit some significant headwinds, as trade uncertainty has dampened business investment, consumer confidence and hiring demand. In March, Canada’s economy lost 33,000 jobs and the unemployment rate climbed to 6.7 per cent. Many economists expect Canada to be hit by a recession starting in the second quarter of this year. The International Monetary Fund has also downgraded its global growth forecast for the year by 0.8 percentage points as the result of Trump’s 10 per cent baseline reciprocal tariffs. Last year, one major driver of growth for the Canadian economy was immigration. However, cuts to immigration levels in Canada this year means population growth won’t be a quick fix for Canada’s growth problem. In addition, Canada’s housing market, which was supposed to recover in 2025, has slowed considerably as buyers stay on the sidelines due to U.S. trade uncertainty. Canada’s new prime minister will have to contend with an economy that is on shaky ground.