In a seriously ill-timed decision, Canadian Prime Minister Justin Trudeau's move to shuffle Chrystia Freeland out of her Finance Minister role has ended up inviting more trouble for his own government. Freeland, the Deputy Prime Minister and Finance Minister, resigned from the cabinet just hours before she was to deliver the critical fall economic statement, which would have also addressed concerns around Donald Trump's tariff threat.

In a disclosure made by her through a letter to the Prime Minister that was put up on social media, she said Trudeau asked her to step down as the Finance Minister and that he would reassign a ministry to her. But she chose to resign instead. However, she will continue as a Liberal MP. Several political commentators speaking to Canadian media said that even if Freeland had lost Trudeau's confidence, the manner in which the move was executed was ham-handed.

There are two stated and interconnected reasons for the dramatic political event, and an unstated one too.

Politics vs Economy

First, the Trudeau government's poor handling of the economy over the last two years has led them to take populist measures ahead of next year's election, such as the GST holiday that is currently underway in Canada and C$250 cheques that are meant to go out to all working people over the new year.

The GST holiday means that people would not pay Goods and Services Tax on the purchase of some essential goodslike groceries and other items over the next two months. In her letter to the Prime Minister, Freeland has made a veiled reference to these measures, terming them "costly political gimmicks". The tax break is estimatedly costing the federal government C$1.46 billion, and the provinces with Harmonized Sales Tax (HST) C$1.26 billion.

The GST holiday that started on December 14 will go on till February 15, 2025. There is no claims process for the GST/HST because shoppers will simply not be charged the tax as it is being factored into the top of the supply chain

However, many political commentators do not view these measures as populists and rather term them as necessary political expediency aimed at conveying a message to the people that the government understands their financial woes when inflation and expensive housing were stretching their monthly budget.

The Trump Tariff Threat

The second reason is that Freeland believes it is these measures that could weaken the impending tariff war with the US. In her letter, she said that the threat from Trump needs to be taken "extremely seriously", which meant "keeping our fiscal powder dry so we have the reserves we may need for a coming tariff war". The letter makes it clear that she was not in favour of the GST holiday and cheques as it would be a drain on government finances.

The Canadian government has been mulling a response to Trump's 25% tariff threat. One of the measures being contemplated is strategic retaliatory tariffs, similar to the action that Canada undertook the last time when Trump imposed the Aluminium and Steel tariff. This was considered a smart move as it eventually led to the lifting of the tariff by the previous Trump administration. For example, Canada imposed a retaliatory 10% tariff on yoghurt, most of which was coming from one plant in Wisconsin, the home state of the then-House Speaker Paul Ryan. The action was a political one that was meant to get President Trump's ear.

The scramble to find a response to Trump's 25% tariff threat this time has sent the Canadian government into a crisis-battling mode. While Trudeau called for calm in the face of the impending tariff battle, Freeland perceived it as him not being serious enough. This even as the Canadian government had been preparing for a Trump comeback since last year, activating their embassy and consulates in the US to start engaging with relevant stakeholders, especially the Republicans, and PM Trudeau making a dash to Mar-a-Lago to meet Trump right after the tariff announcement by him.

Internal Wranglings Among Liberals

Finally, the unstated reason is the internal Liberal party dynamics resulting in the growing mistrust between Freeland and a beleaguered Trudeau over the last year. There have been speculations since July of frosty relations between Trudeau and who he called his close friend' and ally Chrystia Freeland. The Globe and Mail cited unnamed sources to state that there was rising tension between the Prime Minister's and Freeland's offices. This was the time when pressure was growing on Trudeau to step down as Liberal Party leader and Prime Minister to make way for a fresh leadership ahead of the next year's election.

Freeland was also seen as a possible replacement had Trudeau chosen to step down, and that could have been a possible trigger for the growing rift between the two; Trudeau may have perhaps suspected her loyalty. The National Post wrote in July, "On paper, Freeland has the smarts and skills necessary to lead a federal party." However, it graded her down for not being able to connect to the people and voters with her somewhat elitist approach to economic policy and its communication with the general public.

Does Freeland's Resignation Really Mean?

Freeland's decision to resign created drama that Trudeau could have avoided while his government remained in the minority in Parliament. This also raises questions about the very viability of his government and the confidence his own ministers have in him.

Housing Minister Sean Fraser also resigned, suggesting he will not seek re-election as he was also asked to step down. Canadian media reports suggest that a cabinet shuffle could happen as early as Wednesday.

Opposition leader Pierre Poilievre has said that Justin Trudeau has lost control, but is "hanging onto power". The NDP, which pulled its outside support to the Trudeau government in September but still prevented its complete demise, issued a statement that charged at both the Liberals and the Conservatives.

In the statement, NDP leader Jagmeet Singh said, "The withering resignation of Trudeau's right-hand minister shows just how deeply this Liberal government's members are obsessed with infighting and ignoring the urgent challenges everyday Canadians are coping with." He also accused Poilievre of gleeful celebration at the Liberal chaos while ignoring the plight of the people.

Even though this is a huge political blow to Trudeauone that further diminishes the Liberal's electoral credibility come federal electionwhether or not his government survives till the next election depends solely on the NDP and Bloc Qubcois.

Source: ndtv