Challenges Facing Carney Post-Election

Canada's GDP per capita has declined in five of the past six quarters. Reuters/Rebecca Cook/File Photo

News Analysis

Prime Minister Mark Carney has brought the Liberal Party back from the brink of electoral defeat, securing re-election and three seats shy of a majority in the House of Commons.

But with the election over, the real work of effective governing is now before the prime minister, amid numerous challenges. Here’s a look at a few of the most pressing issues.

Canadian Prime Minister Mark Carney speaks to the media after a meeting with U.S. President Donald Trump in Washington on May 6, 2025. Mandel Ngan/AFP via Getty Images

Another Minority Government

Preliminary election results show the Liberals won 169 seats, three short of securing a majority. The count could be slightly adjusted as recounts get underway in ridings with close races.

When Carney was asked on May 2 whether he would enter into a partnership with opposition parties to secure a de-facto majority government—as Prime Minister Justin Trudeau did in 2022 in his supply-and-confidence agreement with the NDP—he ruled it out.

“I have a strong mandate. I think that our objectives are clear,” he said. “Obviously, by definition in Parliament, we will need to get majority support to pass legislation. We will be putting forth legislation that’s consistent with our platform and consistent with the requirements of the time.”

With opposition parties reeling from the election results, and the leaders of the Conservatives and NDP losing their seats, Carney’s minority is likely secure for the near term, as no party wants to go into another election right away.

The Bloc Québécois and the Conservatives have suggested they will work together with the Liberals to help them pass legislation supporting Canadians. Bloc Leader Yves-François Blanchet said on April 29, the day after the election, that his party wants to provide a “stable and responsible” Parliament and is open to a “truce” if the Liberals provide concessions to Quebec.

Conservative House Leader Andrew Scheer, who was selected as official Opposition leader in the House while leader Pierre Poilievre seeks a byelection seat in Alberta, said on May 5 that the party would go beyond partisan differences to support measures that “protect the Canadian economy” against U.S. tariffs. The NDP, which suffered a heavy defeat in the election and lost official party status, has chosen Don Davies as interim leader. Davies has said he'll seek to change the rules to get official party status.

The Liberal government may have more than enough votes to pass legislation related to the U.S. trade war and to support for people and businesses impacted by the tariffs. But down the road, it can be expected that Carney’s government may run into roadblocks with other legislation unless he makes coalition-type agreements.

Construction workers build scaffolding on Parliament Hill in Ottawa on March 20, 2025. The Canadian Press/Sean Kilpatrick

A Divided Canada

The provinces of Alberta and Saskatchewan have been expressing displeasure with Ottawa for years, particularly when it comes to federal policies impacting the oil and gas sector.

Following the federal election, Alberta Premier Danielle Smith said the West is aggrieved that the same Liberal ministers who had implemented policies Albertans find to be against the provincial resource sector have returned to power. This is in the context that both Alberta and Saskatchewan overwhelmingly voted for a Conservative federal government, while the Liberals have formed government for four consecutive terms with support from central Canada voters and elsewhere.

Smith said in an address on May 5 that Carney needs to reset Ottawa’s relationship with Alberta and abandon Liberal government policies restricting the resource sector. Amid rising support for Western independence, Smith said that although she doesn’t support secession, she would allow any citizen-led initiative meeting referendum requirements to go to public vote.

In response to Smith’s address, Carney said that Canada is “stronger when we work together” and that “one can ask the question, but for me the answer is clear.”

But Western alienation sentiment, and a simmering independence movement in Quebec, are issues Carney will need to contend with to keep Canada unified.

Alberta Premier Danielle Smith makes an announcement in Edmonton on April 29, 2025. The Canadian Press/Jason Franson

Slow Economic Growth

The prime minister will also need to grapple with Canada’s sluggish economic growth, both in gross domestic product and per capita GDP. According to the Bank of Canada, the country could enter a recession by the summer and see unemployment rise and incomes drop if the U.S. tariffs are not lifted.

Even before U.S. President Donald Trump’s tariffs, Canada was in a rough spot with its per capita GDP. A Statistics Canada report from April 2024 said GDP per capita declined in five of the past six quarters and was near levels observed in 2017, adding that recent reports “all stressed the trend towards weaker per capita growth, highlighting its negative implications for living standards and wage growth.”

Carney has said his government will endeavour to “spend less and invest more” by lowering government spending and seek to increase private investment across the country.

But with the United States lowering taxes and regulations and focusing on expanding energy developments, Canada will face additional challenges in attracting more investments.

US Tariffs

Carney campaigned on being the party leader best suited to take on the Trump presidency amid compounding tariffs. Just a week after the election, he was put to the test on that front.

Carney met with Trump in the White House on May 6, and while the president said there was nothing Carney could say to have him remove the tariffs, he said he would “love” to sign a new free trade deal with Canada.

President Donald Trump meets Canadian Prime Minister Mark Carney in the Oval Office of the White House, May 6, 2025, in Washington. AP Photo/Evan Vucci

Trump said the USMCA deal was a “transitional step,” and Carney said the agreement was a basis for “broader negotiations.”

The two leaders had a courteous first meeting, but nothing concrete was announced afterwards as far as trade negotiations are concerned.

Affordability

Carney said he entered into politics to deal with Canada’s housing and affordability crisis, which became more severe following the COVID-19 pandemic.

In the wake of the pandemic, supply chain issues and higher energy prices resulting from pandemic policies and global conflicts caused inflation to rise from 1.0 percent in January 2021 to a high of 8.1 percent by June 2022. The Bank of Canada subsequently raised interest rates, with inflation easing in recent months.

However, Canadians have still been struggling with higher prices and increased interest rates, which have harmed general affordability and caused food bank visits to skyrocket. Housing in particular is seen as unaffordable, with a December 2024 survey finding 95 percent of Canadians believe the country is in a housing crisis.

Foreign Interference

While the Foreign Interference Commission documented how foreign powers, the most active among them being China, have attempted to interfere with elections and other democratic institutions in Canada, and the government said it is taking action, the interference continued into the 2025 election.

This included the Security and Intelligence Threats to Elections (SITE) Task Force saying in April that a Beijing-linked transnational repression operation conducted through social media targeted Conservative candidate and outspoken Beijing critic Joe Tay during the election. As well, the security watchdog said China was attempting to influence Chinese-Canadian voters’ opinions on Carney.

Beijing’s attempt to interfere in Canada, which has continued despite the increased public attention, is another issue that will need to be addressed by the federal government.