Mark Carney, Canada’s prime minister, has moved swiftly to bolster the country’s energy sector in the face of sweeping U.S. tariffs imposed by President Donald Trump, warning that the measures will shave roughly C$50bn — equivalent to C$1,300 per Canadian — from national economic output.
In a landmark agreement with Alberta premier Danielle Smith, Mr Carney’s minority Liberal government has abandoned two cornerstone climate policies inherited from Justin Trudeau: a proposed emissions cap on the oil and gas sector and stringent clean-electricity regulations due to take effect in 2035. In exchange, Alberta has committed to strengthen its industrial carbon-pricing regime and back a large-scale carbon capture and storage project.
The accord, signed in Calgary, also revives prospects for a new oil pipeline to Canada’s Pacific coast, a long-stalled initiative aimed at diversifying export markets away from the U.S., which currently absorbs roughly 90 per cent of Canadian crude.
“This government will do whatever it takes not just to protect our sectors but to help them reposition for the new global economy,” Mr Carney told reporters after addressing an industry audience in Calgary.
The policy reversal has provoked immediate backlash from environmentalists and exposed fissures within Mr Carney’s own caucus. Steven Guilbeault, the former environment minister who served under Mr Trudeau and retained his portfolio in the new administration, resigned from cabinet in protest, declaring that Canada’s climate framework was being “dismantled”.
Separate measures unveiled this week underscore Ottawa’s growing pessimism about near-term trade negotiations with Washington. Canada has introduced its own 25 per cent tariff on certain U.S. steel products — including prefabricated buildings, wire and fasteners — while tightening quotas on foreign steel and reducing rail-transport costs for domestic lumber and steel producers.
Mr Carney described a recent telephone conversation with President Trump as “not newsworthy” and confirmed that no formal talks are under way. “We stand ready to re-engage when they are,” he said, adding that Canada would simultaneously pursue alternative markets and trade relationships.
Industry groups in Alberta have welcomed the federal-provincial deal as a pragmatic response to an existential threat, while green advocates warn it jeopardises Canada’s 2050 net-zero commitment. With the Liberal government relying on support from the left-leaning New Democrats to remain in power, further cabinet resignations or parliamentary defections cannot be ruled out.
Markets reacted cautiously: the Canadian dollar steadied against its U.S. counterpart, while shares in Calgary-based energy producers posted modest gains. Analysts estimate the Trump tariffs, if sustained, could reduce Canadian real GDP growth by up to 1.2 percentage points in 2026.
For Mr Carney, a former Bank of Canada and Bank of England governor who assumed office only months ago, the episode marks an early and defining test of his promise to blend economic pragmatism with progressive governance in an era of renewed North American trade friction.
