Among the myriad problems Justin Trudeau is confronting, two have an immediacy that must be especially troubling. One is political, the other economic.

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Joe Oliver: The walls are closing in on Justin Trudeau Back to video

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The political problem is the miraculous improvement in presidential prospects for the Democratic Party since its power brokers, who had shamelessly insisted until the very end how “sharp” Joe Biden was, finally confronted reality and threw him under the bus. Their motivation was not patriotic concern (though that’s their story and they’re sticking with it). The disastrous June 27th debate merely revealed what everyone in contact with the president already knew and what 70 per cent of Americans had been telling pollsters for months: Biden’s obvious cognitive and physical decline made him incapable of serving four more years in office. The bus only arrived, however, once polls began to show he was certain to lose to a Republican they viscerally despise and fear.

Now Kamala Harris, reinvented by her party and the mainstream media from a hopeless drag on Biden’s electoral prospects into a candidate with apparently unstoppable momentum, has opened up a lead over Trump in several battleground states. Still, given her personal and policy vulnerabilities, probably the only one who can beat Donald Trump is Donald Trump, which he might well do if he sticks to personal invective and grievance, rather than Harris’ vulnerabilities — which are her and her running-mate’s woke, left-leaning track records, as well as the Biden administration’s failures on the border, inflation, taxes, jobs, crime and resource development, as well as its weak response to provocations by Iran, China and Russia.

The parallel with our situation is obvious but not exact. Unlike Joe Biden, the prime minister is fit and not in cognitive decline. And his poll numbers are much further underwater than the president’s were before he left the race — which actually means it is far less likely his replacement can turn the tide. Still, caucus and Liberal Party members have probably at last concluded that with Mr. Trudeau at the helm they won’t be able to save the furniture or possibly even avoid being consigned to third place.

Whichever U.S. candidate wins could be bad news for the prime minister. If it’s Kamala Harris, that would show how replacing an unpopular incumbent saved the day. But if Trump wins, Canadians should worry that his contempt for Trudeau, whom he has publicly called very dishonest and weak, a far-left lunatic and the son of Fidel Castro, will work against Canada’s core economic interests, especially with the once-and-future president hellbent on protectionism. On the other hand, Trump also said he didn’t like Chrystia Freeland very much after she participated in a “Taking on the Tyrant” conference of like-minded progressives.

Last year, Canada sent 78 per cent of its exports to, and received half its imports from, the U.S. — so keeping trade relations livable is crucial for us. With continuing irritants and potential flashpoints existing in digital services, news outlets, automobiles, supply management of the dairy industry, critical minerals and soft wood lumber, among other files, poor personal relationships between leaders is the last thing Canada needs.

The second problem the prime minister faces is that while we are not technically in a recession it sure feels like one to many Canadians, as a recent report from RBC points out. Real GDP per capita declined in six of the past seven consecutive quarters, but “decades-high population growth has masked this recession-like economic backdrop.” Otherwise, RBC says, a recession almost certainly would have occurred, especially considering the increase in unemployment. Meanwhile, Canadians pay 43 per cent of their household income in taxes, more than they spend on basic necessities. According to American economist Steven Hanke’s Annual Misery Index, Canada ranked as the most miserable country in the G7 last year.

Granted, a recession was supposed to have happened several times in the last two years, so warnings one is coming have a Chicken Little air, although less so in the light of recent market turbulence. But monetarist analysis, which correctly predicted post-pandemic inflation, points to at least a softening in the U.S. Quantitative tightening since 2022 has brought the money supply back below its level in July of that year. As Hanke points out, “Since the Fed was established in 1913, such contractions have only occurred on four occasions: in 1920-22, 1929-33, 1937-38 and 1948-49. The second episode resulted in the Great Depression, and recessions followed the other three.” Which is why Henke is predicting a recession in the first quarter of 2025.

In contrast, Canada’s M3 money supply is up 5.90 per cent from a year ago. But when the U.S. sneezes Canada gets a cold, so an American downturn would dampen demand for our goods and services and turn Canadians’ current perception of an economic slowdown into the real thing. Economists also worry about the inverted yield curve, i.e., when short-term interest rates are higher than long-term rates. That usually results in a recession, especially when it lasts a long time — and it has now reached two years, longer than the previous record of 623 days set in 1978.

With the walls closing in on him, Justin Trudeau must be searching for a gig where people have not yet seen through his theatrics and still love his climate catastrophism. Canada does not jail former leaders, as third world countries do and our bitterness-drenched southern neighbour is trying, so the prime minister can quit without fear of incarceration. But he should make sure the door doesn’t hit him on his way out.

Financial Post

Joe Oliver was minister of natural resources and then of finance in the Harper government.

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