Trudeau’s shocking call with Freeland sparked Canada’s political crisis

Justin Trudeau’s political future has been shaky for months. But the events that threaten to finish him as Canada’s prime minister snowballed into a crisis in a matter of days.

Everything seemed in hand on Dec. 8 when Trudeau and Chrystia Freeland, his finance minister and longtime deputy, dined at Harrington Lake, the prime minister’s country residence in the hills just north of Ottawa. They chatted about the details of a financial update Freeland was due to release the following week and forged an agreement on the major points, according to people familiar with the discussions.

So when Trudeau informed Freeland five days later that she would soon be out as finance minister, she was deeply upset. Mark Carney, the former Bank of Canada governor and a darling of global markets, was taking over, Trudeau told her. But he had another important job in mind for her: a cabinet role managing Canada’s suddenly fraught relations with the U.S. and President-elect Donald Trump. It did not, however, come with running a government department.

At this point, Trudeau believed he had a firm commitment from Carney to join the cabinet, said a government official with knowledge of the matter. The prime minister would not have made the call otherwise, the person emphasized.

Freeland was having none of it. To her, this was a major demotion – one delivered over a Zoom call, no less. She spent the weekend agonizing over how to respond, according to people familiar with the course of events – stewing with the same frustration she had experienced in the summer, when reports emerged that Trudeau was courting Carney as her possible replacement.

This was the final insult.

Freeland gave Trudeau little time to get ready for what was to come. She called the prime minister on Monday morning and told him she was quitting the cabinet altogether. Shortly after, at 9:07 a.m., she posted a stinging resignation letter on social media site X.

“Our country today faces a grave challenge,” she wrote of Trump’s threat to upend the Canada-U.S. trade relationship. The government needs to take that seriously and store up financial reserves, Freeland went on. “That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”

The words were searing. The timing was humiliating. The phrase “political gimmicks” reverberated through the Canadian capital. And Trudeau was left scrambling to answer the question of who would deliver the financial plan to the House of Commons if there was no finance minister.

On Monday, after Freeland’s resignation later came out, Carney spoke directly with Trudeau and said he would not be joining the government, according to a government official. Carney had started to express second thoughts over the weekend, the person said.

Now, without Freeland, arguably his closest ally, and without Carney, who may have helped turned around his poll numbers, Trudeau is fighting to keep his long-fragile government from collapsing.

Bloomberg spoke with multiple officials who have knowledge of the discussion and the events. All of them spoke on condition of anonymity.

A cabinet shuffle scheduled for Friday offers Trudeau a last chance to shake up his inner circle, and the holiday break may temporarily relieve some pressure. Still, many inside the Liberal Party believe he can’t survive the broadside launched by Freeland, who had been one of his most important and loyal ministers during his nine years in power.

Even before the rupture, dozens of elected lawmakers from his Liberal Party wanted him gone – worried that if he stays, he’ll lead the party to a massive defeat in the next election. Now that camp of dissenters is growing, and their voices are getting louder.

“He’s delusional if he thinks he can continue on this trajectory. The country wants him to step down,” Wayne Long, a Liberal member of parliament from New Brunswick, said in an interview.

There are conflicting views among senior Liberals about what was behind the blow-up, and what comes next.

Some Liberals are still stunned by Freeland’s scorched-earth tactics, resigning on the very day of her scheduled fiscal speech with a letter that implied the prime minister was not taking the Trump threat seriously enough. It had a political ruthlessness that has them wondering if it was a maneuver to force him out so she can run for the job.

People close to Freeland, 56, say her hand was forced by how Trudeau has dealt with her since the summer months, when stories were published in the Globe and Mail newspaper that questioned her communication skills. Freeland was stung by Trudeau’s reticence to strongly defend her in public, these people say.

That controversy eventually faded. Trudeau, 52, stared down a mini-revolt from within his caucus in October. Then came Trump’s triumph.

Trump shook Trudeau’s government with a social media post on Nov. 25, warning he would place 25% tariffs on all goods from Mexico and Canada if those countries failed to make changes to improve border security.

That created urgency for Freeland: She believed the government had to focus on preparing for a trade war and hold back other spending demands.

One point of disagreement appears to be the prime minister’s announcement that the government planned to send C$250 rebate checks to millions of Canadians, at a cost of about C$4.7 billion ($3.3 billion). It was the kind of short-term move she had warned about. Trudeau also implemented a temporary sales-tax holiday on some items, though government officials say Freeland was more supportive of this plan.

It’s clear Trudeau has been desperately looking for solutions to his party’s standing with voters. Liberal Party support is in the low 20% range, according to some polls. If an election were held today, surveys suggest the Conservative Party, led by Pierre Poilievre, would win a huge majority, with representation all across Canada, and a large number of the Liberals’ elected members would lose their seats.

Bringing in Carney, 59, might have helped Trudeau change the story, which is why Trudeau made repeated attempts to bring in the ex-central banker, who’s currently the chair of Brookfield Asset Management and Bloomberg Inc., among other roles. In addition to becoming a minister, Carney would have joined Freeland as a key member of an economic “Team Canada” that would be charged with responding to the Trump administration, according to those familiar with the discussions.

But Freeland took the plan as a crushing rebuke – particularly since her new role didn’t come with running any government department. Before becoming finance minister, she had been trade minister and foreign affairs minister, and she took the lead for Canada in the renegotiation of the North American Free Trade Agreement during the first Trump administration.

She refused, resigned, and Trudeau has been reeling ever since.

An election is due by October, but it can happen sooner. The House is scheduled to return in late January. Soon after, the government is likely to face a confidence vote.

If Trudeau can’t find the votes to win it, Canada would be plunged into an election campaign during Trump’s first weeks in office. Another option for the prime minister is to step down and let Liberals choose a new leader who would also become the prime minister, at least for a short period of time.

“The government is in a state of chaos,” John Manley, a former Liberal finance minister, said on BNN Bloomberg Television.