Prime Minister Justin Trudeau’s administration was thrown into crisis when his trusted deputy, Finance Minister Chrystia Freeland, published a withering resignation letter on Monday that left him weakened at the worst possible time.

Trudeau and his cabinet have been struggling for weeks to show a united front against Donald Trump’s threat to slap 25 per cent tariffs on Canadian goods. The prime minister’s popularity, ebbing for years, is near its lowest point ever. Provincial premiers are sniping at him. Calls for his resignation — common from rivals — are getting louder from members of his own Liberal Party.

All of that was trouble enough for Trudeau. Freeland’s parting shots, though, have pushed his government as close as it’s ever been to collapse, nine years after he swept into office promising “sunny ways.”

Freeland, a former journalist who’s been finance minister since 2020, went public with her opposition to the prime minister’s push for short-term spending on voter-pleasing measures like tax breaks that expand the budget deficit. She suggested such plans make the government look unserious.

“Our country today faces a grave challenge,” Freeland, 56, said in resignation letter on Monday — referring to Trump’s tariff threat.

“That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”

The timing of her letter might as well have been calculated to cause maximum damage. She posted it to social media site X at 9:07 a.m. in Ottawa, as the city’s political district prepared to watch her unveil an update on the country’s fiscal and economic situation.

Markets were braced for bad news about budget deficits. Freeland’s missive simply deepened doubts about Canada’s fiscal buffers. The Canadian dollar immediately fell and bond yields jumped.

Trudeau stayed out of public view. He held a cabinet meeting with his stunned ministers, while government officials in a nearby building wondered what to do with advance copies of the statement Freeland was meant to deliver after financial markets closed, around 4 p.m. Ottawa time.

Confusion reigned. Civil servants drew black cloths over the documents while many reporters abandoned the briefing room. Trudeau skipped question period in the House of Commons and said nothing publicly. Later, he briefly appeared on-camera at a ceremony to swear in Dominic LeBlanc as Freeland’s replacement.

LeBlanc is a veteran politician who is considered one of the safest pairs of hands in the cabinet. When Trudeau, 52, flew to Florida last month to meet Trump at his Mar-a-Lago resort, LeBlanc, who’s responsible for border security, went with him.

All the same, Freeland’s abrupt exit is a political nightmare for Trudeau. It deprives him of a minister who was crucial to the government’s mostly-successful efforts in 2018 to preserve close trade ties with the U.S., during Trump’s first term.

“This isn’t about some grumpy caucus members. This is about a key player, a senior cabinet minister and previously a very strong ally, turning around and publicly distancing herself from the policy of the current government,” pollster Nik Nanos said.

Her departure probably “accelerates the election to the next possible confidence vote,” he added. In other words, it boosts the odds of an election in early 2025. Trudeau’s aides had been hoping the government could survive until next October, buying time for voter anger about inflation and immigration to cool off.

“It’s actually an example of another G7 country government teetering on the brink because of a budget controversy,” Nanos said, alluding to recent political upheaval in France and Germany.

In the short term, the instability of Trudeau’s government undermines its ability to respond to whatever Trump has in store — a fact that other ministers seem aware of.

“We know that President Trump is coming in office on the 20th of January,” Industry Minister François-Philippe Champagne said to reporters after Liberal lawmakers met on Monday evening. “We owe it to Canadians, we owe it to our families and to our friends and everyone in Canada, to be the best prepared.”

Trudeau left the meeting without speaking to reporters, though he showed up later at a Liberal fundraising event. “It is the absolute privilege of my life to serve as your prime minister,” he told the audience — in the present tense.

Trump commented on the turmoil in a post on his Truth Social platform late Monday, saying Freeland was “toxic” and “not at all conducive to making deals which are good for the very unhappy citizens of Canada. She will not be missed!!!”

Minister without department

Freeland’s resignation thrust into the open the tensions between her office and Trudeau’s that had been simmering for some time. Freeland said she’d refused the offer of an alternative post from Trudeau on Friday. That job would have involved helping manage the Canada-U.S. relationship but would not have included a government department to run, according to a government official who spoke on condition of anonymity.

Transport Minister Anita Anand lent force to Freeland’s departure, calling the ex-minister “a good friend” and adding that the news “has hit me really hard, and I’ll reserve further comment until I have time to process it.”

A finance minister’s resignation can be hard to recover from. In 2022, U.K. Chancellor Rishi Sunak stepped down, attacking Prime Minister Boris Johnson’s conduct and triggering a cascade of ministerial departures which toppled Johnson despite his big parliamentary majority.

Even before Freeland shocked the country with her letter, Trudeau’s grasp on power already appeared to be slipping. In September, the opposition New Democratic Party pulled out of a so-called “supply and confidence” arrangement that helped the Liberals pass laws in the House of Commons, where they’re the largest party but don’t have a majority of seats. As a result, the government is at risk of falling in any major vote.

Wilson Center researcher Xavier Delgado said NDP Leader Jagmeet Singh faces a dilemma. Polling indicates his party would have a “dismal showing if an election were to take place tomorrow.” But keeping the Trudeau government alive “risks further tying himself and his party to the Liberals,” Delgado said.

Singh called on Monday for Trudeau to quit. So did Chad Collins, one of about two dozen Liberal members of parliament who signed a letter in October telling the prime minister it was time to give up.

Those developments underscore that, after Trudeau’s terrible day, the rest of the week isn’t likely to get easier. The prime minister has invited media to hear him speak at a caucus holiday party on Tuesday. It isn’t going to be the festive occasion he may have hoped for.

With assistance from Melissa Shin

Bloomberg.com