Mark Carney understands the new world, but can he survive it?

Rarely has a Canadian prime minister faced so many challenges.

MARK CARNEY left the Swiss Alps on January 21st with a swagger. Canada’s prime minister had entranced the Davos elite with a blunt speech about the end of the rules-based order, how middle powers like Canada could survive the coercion of great powers like the United States and China. Reality began testing his rhetoric immediately. On January 22nd Scott Bessent, America’s treasury secretary, encouraged the secessionist movement in Alberta, saying the province should “come on down” and join the United States. Two days later Donald Trump vowed to apply a 100% tariff to all Canadian exports if “Canada makes a deal with China”. Mr Carney had been in Beijing resetting relations and making nice on trade the week before Davos.

Canada's Prime Minister Mark Carney frolicking at the Quebec Winter Carnival on January 22. (Reuters Photo)

Rarely has a Canadian prime minister faced so many challenges. David Coletto, the boss of Abacus Data, a polling firm, reckons Mr Carney probably amassed domestic political capital with his Davos speech, a rallying cry to stand up to Mr Trump, which plays well with most Canadians. And Mr Carney remains substantially more popular than his Conservative rival, Pierre Poilievre (see chart). But he will need to draw on that capital directly.

The first challenge for the Carney government is to reassure Canadians who are unnerved not just by constant threats to their sovereignty, but by damage to their livelihoods. Most analysts think the economy grew by just over 1% in 2025 despite Mr Trump’s tariffs. But sectoral duties pummelled the steel, car and aluminium industries in eastern Canada, leading to thousands of lay-offs. Expensive housing and the rising cost of food are causing anxiety. Visits to food banks reached an all-time high last year. “Canadian households are grappling with the largest confidence shocks they’ve ever seen,” says Frances Donald, chief economist at RBC, a Canadian bank. Marc Miller, a minister, summed up the task after attending a cabinet meeting to discuss Canadian foreboding on January 23rd: “We have to focus on the end of the world, as well as the end of the month.”

Mr Carney’s warming of trade relations with China is part of that reassurance. That China has agreed to lift tariffs on Canada’s agricultural exports will prompt relief in western provinces like Saskatchewan, which send billions of dollars of rape-seed and its oil to China every year. In exchange, Mr Carney agreed to drop Canada’s 100% tariff on Chinese electric vehicles to just 6.1% for at least the first 49,000 cars imported each year. Consumers may welcome access to cheap, high-quality vehicles.

The government must also navigate secessionist movements which are rising in both the east and the west of the immense country. Canada has faced near disintegration in the past. Voters in the overwhelmingly French-speaking province of Quebec came within one percentage-point—54,000 votes—of opting to leave the federation in 1995. Polls suggest the separatist Parti Québécois (PQ) is poised to take control of the legislature in provincial elections no later than October. The PQ has promised to hold another independence referendum if elected.

A more immediate secessionist threat lies in Alberta. That province has the highest GDP per person in Canada, built on the third-largest proven reserves of oil in the world. It also has an elevated level of frustration with the federal government, whose regulations have limited Alberta’s ability to build infrastructure to export oil and gas via Canada’s west coast. Mr Bessent linked the Albertan desire for independence to its thwarted attempts to build pipelines. “People want sovereignty,” Mr Bessent said in a television interview from Davos. “They want what the US has got.” Mr Trump has said repeatedly that Canada should be America’s 51st state.

The most recent polling on the issue, released by Ipsos, a research firm, suggests that only 28% of Albertans would choose to leave Canada. But the sentiment is worrying, and part of the reason that Mr Carney signed an agreement with Alberta in November to fast-track the construction of an oil pipeline that would send 1m barrels daily to the Pacific coast for export. The province just needs to drum up the money.

Many of the companies and pension funds that would finance the construction of new ports, railways, transmission lines and pipelines complain privately to Mr Carney that environmental rules are too cumbersome. They also want taxpayers to shoulder some of the risk of their investments. The prime minister needs improved infrastructure in order to meet his goal of doubling exports to the world beyond the United States within a decade. “Now we need to execute. Fairly and fast,” Mr Carney said in Quebec City on January 22nd.

Executing will be much harder if Mr Trump abandons USMCA, the continental free-trade pact he renegotiated with Canada and Mexico in 2018. His most recent tariff threat, of 100% levies on “all Canadian goods and products”, would blow up the deal. Mr Trump appears to think little of the pact, which he calls “irrelevant”. Few economists believe Mr Carney can attract the investment he needs to build new infrastructure unless Canada continues to have low-tariff or no-tariff access to the American market. Thus Mr Carney’s middle power must find some kind of arrangement with the great one next door.

Solving these problems is made harder by the fact that Mr Carney leads a minority government. His Liberal Party is one seat shy of a majority in parliament. As a result, the government has struggled to advance Mr Carney’s agenda. The Liberals persuaded two Conservatives to cross the floor in 2025, and have hinted more could follow.

Failing that, despite having been in power for less than a year, Mr Carney might be tempted to call a snap election. Mr Coletto’s surveys suggest that the Liberals are neck-and-neck with the Conservatives, but Mr Carney’s advantage over Mr Poillevre might give him confidence. Another election campaign against Mr Trump’s bombast and a struggling Conservative rival might tempt . “Half of Canadians already think we’re in a recession,” said Mr Coletto. “It’s a risk.” It may be yet another risk that Mr Carney feels he must take.