Canadian Prime Minister Justin Trudeau resigned after the majority of his own party stepped down.

“Canadians deserve a real choice in the next election, and with internal struggles, it has become clear to me that I cannot be the person to carry the Liberal standard into the next election,” Trudeau said on Monday.

During his nine years in power, Trudeau represented the Liberals globally in the “culture wars” but failed to find solutions to the cost-of-living crisis and economic stagnation at home.

Canadians have grown increasingly dissatisfied with Trudeau’s economic policies. Canada’s gross domestic product (GDP) per capita has contracted for six consecutive quarters and has fallen by 3.5% since its peak in 2022—a decline never before seen outside of a recession.

Unemployment continues to rise, while wages are not keeping pace with market price increases. The dream of homeownership seems even more unattainable for many young Canadians, an important voting bloc that helped elect Trudeau.

The Liberal Party will move away from ‘Trudeau-style progressivism’

The economy, which under Trudeau focused on record immigration, expanded government spending, and “green” goals, is expected to enter a period of “restructuring” in the face of Donald Trump’s administration and the threat of potential tariffs from the United States.

As Canada prepares for the Trump era, the Conservative Party is gearing up to take power and steer the country away from Trudeau’s “progressive-liberal” policies.

Although the Liberal Party will now choose Canada’s next leader, the country will likely face a national election soon after. Some polls show the Liberals trailing the Conservatives by 20 points, and the world’s fourth-largest oil-producing nation is likely to debate taxes, spending, and environmental regulations.

Anthony Housefather, a Liberal Party MP from the Montreal region, said earlier that a new leader could help the Liberals abandon the “progressive” agenda led by Trudeau and present a “more centrist vision.”

Conservatives poised to win elections with ‘Trumpist’ policies

Pierre Poilievre, leader of the Conservatives and expected to become prime minister after the next election, promises to reduce Trudeau’s carbon tax while increasing raw material production.

If the Conservatives win, they are expected to favor a government that is “more pro-business and pro-extraction, smaller government, and less spending.”

“Canadians can take back control of their lives and their country, take back control of our border, take back control of immigration, take back control of spending, deficits, and inflation, take back control of our streets,” Poilievre said in a video posted after Trudeau’s resignation, adding, “and put Canada first.”

In an interview with Canadian right-wing influencer Jordan Peterson last week, Poilievre said he admired the economic models of Ireland, Singapore, Switzerland, and Israel, stating he would cut federal aid such as foreign aid, outsourcing, and grants or loans to businesses in favor of lower taxes overall.

Trump continues to mock Trudeau

Such policies align more closely with Trump’s. Trump has threatened a 25% tariff on his northern neighbor and mocked Canada as the “51st state” of the United States.

Indeed, in a Truth Social post following the Canadian politician’s resignation, Trump wrote: “The United States can no longer tolerate the massive trade deficits and subsidies Canada needs to survive. Justin Trudeau knew this and resigned.”

Trudeau, 53, will remain prime minister until a new leader is elected, likely in March.

Potential candidates include Chrystia Freeland, whose resignation as finance minister last month signaled the end for Trudeau; Dominic LeBlanc, a Trudeau ally who replaced her; and Mark Carney, former governor of the Bank of Canada, who is also chairman of Brookfield Asset Management and Bloomberg.

Budget and fiscal issues stand out

Fiscal spending has emerged as a key issue for Trudeau, with Freeland emphasizing her disagreement with the prime minister as she resigned, suggesting that proposed tax rebates were “irresponsible political gimmicks.”

The country’s federal debt has almost doubled since 2015, rising to 1.24 trillion Canadian dollars (US$870 billion) in the 2023–24 fiscal year.

However, the federal government has added billions of dollars in permanent new spending measures, including child benefit vouchers, subsidized daycare, and a national dental plan.

Total program spending accounted for 16.2% of the economy last fiscal year—the highest rate since the early 1990s, excluding the COVID-19 pandemic.

The share prices of Chinese technology company Tencent Holdings and battery maker Contemporary Amperex Technology (CATL) fell sharply on Tuesday following their inclusion in the Pentagon’s list of companies allegedly linked to the Chinese military.

Hong Kong-listed Tencent shares closed down 7.28%, while Shenzhen-listed CATL ended the day down 2.84%, having lost over 5% at the open. Meanwhile, the share price of Shanghai-listed Quectel Wireless, another newly listed company, fell around 8% in the morning and ended the day down 6.18%.

These companies were added on Monday to the “Section 1260H list” under the 2021 National Defence Authorization Act by the U.S. Department of Defense, which identifies them as “Chinese military companies operating in the U.S.”

In response, Tencent, CATL, and Quectel Wireless denied the allegations, with Tencent’s U.S. over-the-counter shares falling 7.82% overnight. The companies stated the inclusion was a mistake, with Quectel’s statement being reported by Reuters.

Although inclusion on the list does not equate to a ban or directly impact company operations, analysts noted the potential reputational damage.

Ivan Su, a senior equity analyst at Morningstar, said in a note: “Given Tencent’s business model, which mainly revolves around social networking and online gaming, we believe the company has a good chance of securing delisting through U.S. courts, just as Xiaomi was successfully delisted four months after being listed in 2021.”

The list’s scope expanded under a December amendment to the National Defence Authorisation Act, broadening the definition of “Chinese military companies” to include entities associated with Chinese military, paramilitary, security forces, law enforcement, and border control, as well as the State-owned Assets Supervision and Administration Commission. A Hong Kong-based lawyer specializing in sanctions noted this shift as a significant change in U.S. policy.

The lawyer added, “This effectively broadened the definition. The current U.S. administration appears to be exercising its power in the final days of its term.”

AI company SenseTime, also added to the list, issued a statement strongly opposing the move, stating it had “no factual basis” and caused no material impact on its business. Similarly, Hesai Technology, re-listed after being previously removed, vowed to continue legal proceedings. CEO David Li described the designation as “ridiculous” in an interview with Nikkei Asia.

Companies removed from the list include Megvii and China Railway Construction Corporation (CRCC), while entities such as IDG Capital and AMEC previously fought legal battles to secure delisting.

Chinese Foreign Ministry spokesman Guo Jiakun condemned the Pentagon’s actions, stating, “China strongly opposes the U.S. generalizing the concept of national security and creating discriminatory lists under different categories to unreasonably pressure Chinese companies.”

Representative French Hill, a 68-year-old former banker from Arkansas, has made significant efforts to gain Silicon Valley’s support in the U.S. Congress, ultimately becoming the leader of the House Financial Services Committee.

In recent years, as a member of the House Financial Services Committee, Hill has emerged as a leading advocate for policies supporting emerging technology sectors, including cryptocurrency and artificial intelligence, according to POLITICO.

This focus has garnered support from a new political power base in Silicon Valley, which has deep ties to incoming President Donald Trump. These connections helped Trump raise campaign donations and provided effective support, strengthening Hill’s position against three other top House Republicans.

POLITICO reports that Hill’s rise underscores the growing influence of Silicon Valley in Washington.

“He knows the community, he knows the industry, and with an incoming president, that’s where he wants to focus,” said Republican House of Representatives member Tom Emmer, a member of the Republican Party steering group that selects committee leaders and a prominent supporter of the crypto industry.

The Financial Services Committee, long known for its focus on Wall Street, where financiers seek to influence bank regulation, is increasingly turning its attention to financial technology issues. This shift has opened the door for emerging industries to wield new influence.

While the priorities of the legacy banking sector do not always align with those of the tech industry, Hill has facilitated this transition. He is now positioned to provide emerging tech sectors like crypto with a powerful ally to drive industry-friendly policies through Congress during a potential second Trump administration.

Silicon Valley luminaries such as billionaire Elon Musk and venture capitalist David Sacks, Trump’s choice as White House czar for crypto and artificial intelligence, are giving the venture capital and emerging tech sectors more influence than ever as they prepare to help shape policy in Trump’s new term.

Bobby Franklin, president and CEO of the National Venture Capital Association, the trade group representing venture capital firms, said: “This is a great choice for the industry. I expect French to further advance many of the things that are important to us.”

Hill’s Silicon Valley connections have helped him become one of the top fundraisers for House Republicans, a trait that has bolstered his race for leadership of the Financial Services Committee.

In the past year, he has received donations from several top executives at crypto and venture capital firms, including Trump-supporting billionaire Marc Andreessen, founder of venture capital giant Andreessen Horowitz, and Brian Armstrong, CEO of Coinbase, the largest U.S. crypto exchange.

Hill’s fundraiser, held in October in the Silicon Valley suburb of Woodside, California, was attended by leading figures in the technology and venture capital business.

Three people familiar with the event said it was hosted by Fred Ehrsam and Matt Huang, founders of crypto investment firm Paradigm, as well as other tech CEOs, including Kevin Kelly of Sequoia Heritage, Neil Mehta of Greenoaks Capital, Katie Haun of Haun Ventures, Patrick Collison of Stripe, and Vlad Tenev of Robinhood.

Others who donated to Hill ahead of the event, which raised nearly half a million dollars for Hill and the House Republicans’ campaign arm, include Multicoin Capital co-founder Kyle Samani and Solana Labs co-founders Anatoly Yakovenko and Raj Gokal, according to FEC filings.

Venture capitalists like Franklin say it wasn’t just drafting crypto policy that helped Hill win them over. Franklin points to Hill’s experience building his own company (a public bank) as well as his support for the DEAL Act, which would “increase access to capital for early-stage startups.” Hill is also co-chair of the Congressional Entrepreneurship Caucus.