Canada's Finance Minister Chrystia Freeland Resigns From Cabinet -- 4th Update

By Paul Vieira

OTTAWA--Canada's Finance Minister Chrystia Freeland said Monday she was quitting the Liberal government cabinet, citing conflict with Prime Minister Justin Trudeau over the direction of fiscal policy.

The shock move comes on the same day Freeland was scheduled to introduce a fall economic statement, in which most analysts expect to show bigger budget deficits than the government promised just a year ago. A spokesman for the finance ministry said officials were determining the next steps for the fall update amid Freeland's surprise resignation.

The news roiled the capital, with one of Trudeau's most loyal and trusted lieutenants choosing to leave with a stinging letter critical of the government's direction. The departure will cast further doubt about how long Trudeau can hold on as prime minister and Liberal Party leader given the government's deep unpopularity in public-opinion polls, political analysts say. Nearly all public-opinion polls show the Liberals trailing the Conservative Party by roughly 20 percentage points. Trudeau has repeatedly said he would stay on as prime minister and seek re-election next year.

In a letter addressed to Trudeau and posted to the social-media platform X, Freeland said Trudeau informed her last Friday that he no longer wanted her to serve as the country's finance minister, but serve in another cabinet position.

"I have concluded that the only honest and viable path is for me to resign from the cabinet," she said in the letter, adding that she and the prime minister have "found ourselves at odds" about policy.

A spokeswoman for Trudeau was not immediately available for comment. Trudeau met with his cabinet Monday morning for a previously scheduled meeting.

"She's walking away saying, 'I don't have confidence in you,'" said Duane Bratt, a political-science professor at Mount Royal University in Calgary, Alberta, in reference to Trudeau. "It was a pretty scathing letter."

The letter indicates Freeland opposed the recent direction of fiscal policy amid the threat of a 25% tariff from President-elect Donald Trump on imports from Canada--a move economists say would likely trigger a recession in the country. Bank of Canada Gov. Tiff Macklem said last week that a 25% tariff would be widely disruptive for the Canadian economy. She said during the fall, she made "strenuous efforts" to manage fiscal policy to limit spending growth amid heightened uncertainty.

Last month, Trudeau and Freeland unveiled a mini-stimulus package the government rolled out, which envisaged spending over 6 billion Canadian dollars, or the equivalent of $4.2 billion, on a broad sales-tax exemption and a one-time payment to about 18 million Canadians.

Freeland said the government needs to take the Trump tariff threat "extremely seriously. 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."

Darrell Bricker, head of polling firm Ipsos Public Affairs, said Freeland's resignation and the accompanying letter "is the biggest crisis the prime minister has ever faced. Trudeau's future is now very precarious because others get to decide his fate."

Trudeau leads a minority government, so the Liberals need the support of at least one of the four opposition parties to get legislation passed and survive confidence votes in parliament. About two-thirds of the public disapproves of Trudeau's performance. His Liberal Party is losing once-safe seats in Toronto and Montreal, and some members of his caucus had argued in the fall that Trudeau needs to go. The prime minister said he was staying on. A poll this month from Ottawa-based Abacus Data indicated Trump is more popular in Canada than Trudeau.

A number of Trudeau's cabinet ministers have said they won't be seeking re-election. Earlier Monday, Housing Minister Sean Fraser said he would be leaving the cabinet, citing family reasons.

One Liberal Party lawmaker, Francis Drouin, said it was now time for Trudeau to step aside as prime minister. "I have been a great defender, but I don't just see how we move forward," Drouin told Canadian Broadcasting Corp. about Trudeau's future. "I don't see how this helps the prime minister, and I don't see a way out."

Freeland said she intends to remain a Liberal Party lawmaker representing constituents in Toronto, and run for re-election next year. She was foreign minister during the first Trump administration, and led a team of negotiators in Trump's effort to rewrite a North American free-trade pact. She gained praise for her efforts, in which the trade was salvaged through changes that Canada found amenable.

Write to Paul Vieira at [e-mail]

(END) Dow Jones Newswires

12-16-24 1214ET