Chrystia Freeland Resigns, Threatening Trudeau’s Hold on Power

Chrystia Freeland, the deputy prime minister and finance minister, had been helping lead Canada’s response to the incoming Trump administration.

Prime Minister Justin Trudeau’s hold on power was threatened on Monday after the deputy prime minister who led Canada’s response to the first Trump administration resigned abruptly, in a stinging rebuke to the country’s leader.

The high-profile departure of the minister, Chrystia Freeland, comes at a treacherous moment for Canada. President-elect Donald J. Trump has warned that he will impose 25 percent tariffs on goods from Canada and Mexico unless the two countries do more to curb the flow of undocumented migrants and drugs into the United States.

Ms. Freeland, who helped steer the Trudeau government through many challenges, had been playing a prominent role in forming Canada’s response to the incoming Trump administration, leading a team of government officials preparing for the transition.

In her letter of resignation, Ms. Freeland accused Mr. Trudeau, who is deeply unpopular at home, of engaging in “costly political gimmicks” instead of focusing on countering the grave threat of tariffs.

Canadians, she said, “know when we are working for them, and they equally know when we are focused on ourselves.”

She said the breakdown with Mr. Trudeau had come over his push for measures, including a sales tax holiday and sending modest checks to taxpayers, that would add to the government’s deficit.

She said she believed this spending, aimed at currying support among voters, would undermine Canada’s finances and its ability to deal with Mr. Trump’s tariff threat.

Late Monday, Mr. Trump reacted on social media by deriding Ms. Freeland. “The Great State of Canada is stunned as the Finance Minister resigns, or was fired, from her position by Governor Justin Trudeau,” he wrote on his Truth Social account, repeating an ongoing joke in which he refers to Canada as the 51st state and Mr. Trudeau as its governor.

“Her behavior was totally toxic, and not at all conducive to making deals which are good for the very unhappy citizens of Canada. She will not be missed!!!” he added. The two had clashed during the renegotiation of the North American Free Trade Agreement in his first term.

Ms. Freeland, who had been the finance minister, was scheduled on Monday to outline the government’s commitments to improve border security with the United States as part of an interim budget known as the economic statement.

Under Pressure

The resignation of Mr. Trudeau’s most steadfast ally set off a broad revolt from members of his own party who called on the prime minister to resign as the leader of the Liberal Party.

Pierre Poilievre, the leader of the Conservative Party, which is more than 20 percentage points ahead of Mr. Trudeau’s Liberals in recent polls, read excerpts from Ms. Freeland’s resignation letter at a news conference in Ottawa on Monday.

“What we are seeing is the government of Canada itself is spiraling out of control right before our eyes, and at the very worst time,” Mr. Poilievre said, asking Mr. Trudeau to immediately schedule a federal election.

On Monday, another senior cabinet member and rising star within Mr. Trudeau’s party, Sean Fraser, the housing minister, announced he would resign, compounding the sense that the prime minister’s lieutenants were abandoning him.

In addition to Mr. Fraser, four cabinet ministers have in the past several weeks said they would not run in the next election. Mr. Trudeau’s party has lost two long-held seats so far in special elections called this year.

Trudeau’s Dilemma

Given Canada’s political system and the rules around elections and party leadership, Mr. Trudeau faces three possible scenarios.

First, there could be such an overwhelming challenge by his own party that he is forced to step down as leader of the Liberals. This would set off an internal election process for a new leader. Ms. Freeland is considered a likely contestant, alongside other senior cabinet members such as the foreign minister, Mélanie Joly.

A new party leader would steer the Liberals to a federal election in which the leader would vie to become prime minister, facing off with Mr. Poilievre and his Conservatives. This is what many Liberal members of Parliament are calling for, but the decision rests with Mr. Trudeau: There’s no official mechanism to force him to step down as head of the party.

Mr. Trudeau could also call for an early election and lead the Liberals to the polls himself. He has repeatedly said that is what he intends to do. Under Canadian rules, he must call for a vote by October.

Mr. Poilievre would like these elections to happen sooner, in part so that a new government is in place to manage the transition to Mr. Trump’s new tenure in the White House.

Mr. Trudeau could also simply ignore calls to step down by his own party, as well as calls to schedule early elections by the opposition leader, and stay in charge until a later date closer to the October deadline, eventually leading the Liberals to elections again.

An election could also be triggered if the government’s economic statement, which is a type of interim budget, fails to get parliamentary support. Mr. Trudeau’s Liberals do not hold a majority of votes in the House of Commons and rely on alliances with opposition parties to pass laws.

Adding further uncertainty to the political process, Mr. Trudeau could also ask the governor general, Canada’s ceremonial head of state as King Charles’s representative, to shut down parliamentary sessions in a process known as prorogation.

The Bitter End

The breakdown between Mr. Trudeau and Ms. Freeland had been building for weeks, especially after Mr. Trudeau did not include her when he visited Mar-a-Lago to see Mr. Trump in person last month.

Ms. Freeland, who had an international career as a senior journalist and newsroom leader at The Financial Times, Reuters and elsewhere before entering Canadian politics, is married to a New York Times reporter who works for the Culture desk.

In the end, the key relationship between Mr. Trudeau and Ms. Freeland unraveled over a Zoom call on Friday, two people familiar with the events said.

During the call, Mr. Trudeau asked Ms. Freeland to step down as finance minister but suggested she continue leading the government’s response to Mr. Trump, in what would have amounted to a demotion, said the people who asked not to be identified because they were not authorized to publicly discuss a private meeting.

Ms. Freeland responded that she could not credibly lead the transition efforts without commanding a government department, said the people.

The updated economic statement unveiled on Monday after Ms. Freeland’s dramatic exit held clues about her dismay: It calls for about 20 billion Canadian dollars in new spending and calculated the federal deficit at 61.9 billion Canadian dollars ($43.4 billion), unraveling Ms. Freeland’s promise to keep it below 40.1 billion Canadian dollars.

The budget includes a boost of 600 million Canadian dollars to border security spending over the next six years, bringing total spending to 1.3 billion Canadian dollars without offering specifics on how the extra funds would be spent.

By all accounts, Ms. Freeland was among the most experienced cabinet members in Mr. Trudeau’s government to deal with Mr. Trump.

A Ukrainian Canadian, she had been a point person for Ukraine since Russia’s full-scale invasion. And she had successfully renegotiated NAFTA with the first Trump White House. In her resignation letter, she said that managing Mr. Trump’s second term would be a consequential issue for Canada’s future.

“How we deal with the threat our country currently faces will define us for a generation, and perhaps longer,” Ms. Freeland said.

In his only public remarks on Monday evening, Mr. Trudeau made only passing references to his political crisis during a speech to major Liberal Party donors.

“It’s obviously been an eventful day,” Mr. Trudeau said.

He did not mention Ms. Freeland in his remarks, which went through his stock recap of the government’s accomplishments and critique of his Conservative rival, occasionally prompting cheers from the partisan crowd, many of whom later lined up to pose for selfies with Mr. Trudeau.

“That’s at the core of what makes us Liberals,” Mr. Trudeau said after discussing his love of Canada. “And that’s why you show up here, even on the toughest days as a party.”

Vjosa Isai contributed reporting from Toronto.

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