Canada’s Liberal minority win sparks financial uncertainty as US tariffs and OAS costs collide
Canadian Prime Minister Mark Carney has secured a minority government, with his Liberal Party elected or leading in 167 seats—five short of the 172 needed for a majority in the 343-seat House of Commons, as reported by Reuters.
The result has direct implications for trade strategy, taxation, and retirement planning—especially as the Liberals prepare to navigate rising tensions with US President Donald Trump while managing fiscal pressures at home.
The Canada–US trade relationship dominated the campaign’s final stretch, with Carney stating in his victory speech that “Our old relationship with the United States, a relationship based on steadily increasing integration, is over.”
He said that Canada must now contend with a new global order where the US is no longer a reliable trade anchor.
Carney pledged to invest billions to reduce Canada’s dependence on the US. Trump had threatened a 25 percent tariff on Canadian-made cars and hinted at annexation.
“President Trump is trying to break us so America can own us. That will never ever happen,” Carney said.
These threats stirred a wave of patriotism and helped shift support from smaller parties toward the Liberals.
Polling expert Shachi Kurl of Angus Reid Institute told Reuters the Liberal win was driven by the “anybody-but-Conservative” vote, backlash to Trump’s tariffs, and the resignation of unpopular former Prime Minister Justin Trudeau.
Carney’s early foreign policy has focused on expanding trade ties beyond the US.
Since taking office in March, according to The Globe and Mail, his first official trips were to Paris and London.
He described Canada as the “most European of non-European countries” and pledged to revive momentum around the 2016 Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU.
European Commission President Ursula von der Leyen welcomed the election outcome and said, “We’ll defend our shared democratic values, promote multilateralism and champion free and fair trade.”
UK Prime Minister Keir Starmer referenced Carney’s tenure at the Bank of England, noting, “With your leadership, and personal ties to the UK, I know the relationship between our two countries will continue to grow.”
French President Emmanuel Macron and other EU leaders also echoed support for a stronger Canada–EU alliance. Carney expressed interest in a new military production deal with the EU.
Australia’s Prime Minister Anthony Albanese also praised Carney for resolving a dispute over Vegemite regulations, describing the outcome as “a really practical outcome of the friendship that we have between Australia and Canada.”
As noted in an opinion piece from The Globe and Mail, financial advisors should watch how the minority government handles spending constraints while addressing retirement and housing affordability issues.
Spending on Old Age Security (OAS) rose to 16.5 percent of total government revenue in the 2023–24 fiscal year, up from 15.5 percent the year before.
Potential changes include increasing the OAS eligibility age from 65 to 67 and expanding clawbacks.
While just 8.3 percent of recipients currently face clawbacks, any adjustment could impact near-retirees and higher-income clients.
The Liberals also plan to lower the minimum withdrawal from Registered Retirement Income Funds (RRIFs) by 25 percent this year.
However, the same opinion piece noted that broader reforms to reflect longer lifespans remain unlikely due to the government's need for revenue to support defence and economic priorities.
Carney’s housing plan includes doubling annual new home construction to 500,000 and waiving GST for first-time buyers of homes under $1m.
Yet, as The Globe and Mail warned, housing affordability will likely remain constrained unless income growth improves or capital gains tax exemptions on principal residences are re-evaluated.
According to the same Globe and Mail opinion piece, the Liberals’ ability to manage trade pressures with Trump will significantly influence economic stability and Bank of Canada policy.
There have already been two rate cuts in 2025, with up to five more possible. Variable-rate mortgages have become more competitive compared to fixed-rate options, which are responding to bond market volatility.
For portfolio management, the opinion piece noted that historical data from Scotiabank Global Economics shows no consistent link between election outcomes and Canadian stock market performance.
So far this year, the S&P/TSX Composite Index has outperformed the S&P 500 but lags behind the EAFE index. Advisors are encouraged to maintain diversified exposure across Canadian, US, and international equities.
The Liberals’ ambition to make Canada “the world’s leading energy superpower” may warrant closer attention to underperforming energy stocks, particularly as geopolitical risks reshape commodity flows and investment priorities.
According to Reuters, minority governments in Canada rarely last beyond 2.5 years, and Carney will face immediate scrutiny from a strengthened Conservative opposition.
Poilievre, who campaigned on inflation, crime, and housing, said in his concession speech that “We didn’t quite get over the finish line yet. We know that change is needed, but change is hard to come by. It takes time.”
The Globe and Mail reports that the next major test for Carney will be the June G7 Summit in Kananaskis, Alberta, where he will face President Trump directly.
