(Bloomberg) -- The race to be Canada’s next prime minister is still at the starting line and Donald Trump has already cast a shadow over it.
The US president-elect made his most menacing comments yet about Canada on Tuesday, suggesting his administration could use “economic force” to turn the country into a US state. Trump repeated his claim that the US trade deficit is a subsidy and his intention to impose “serious” tariffs on goods the US buys from Canada and Mexico.
His comments ensure that the Canada-US relationship — and who can best deal with an emboldened Trump — will be a top issue in the contest to lead the Liberal Party. Prime Minister Justin Trudeau triggered that race on Monday when he said he’ll step down once his successor is chosen.
Already, one of the country’s most senior cabinet ministers has decided he won’t run. Finance Minister Dominic LeBlanc said Wednesday he’s staying out of the race to focus on his work as the point person for the government in dealing with the US.
“The threat these tariffs pose to our nation’s economic well-being and to the livelihood of a countless number of Canadian families cannot be understated — and as such, it requires nothing less than my full attention,” LeBlanc wrote on social media site X.
The leadership contest may take a couple of months, which means a new leader might step into the job of prime minister in the midst of a trade war and a recession in Canada.
Dealing with Trump “isn’t just the most pressing foreign policy challenge we face. The domestic implications are so profound,” said Scott Reid, a former adviser to Paul Martin, Canada’s prime minister from 2003 to 2006. “It is the No. 1 policy challenge that the country is going to endure in this next number of months.”
Those taunts about Canada becoming the 51st US state brought a rebuke from Trudeau — “There isn’t a snowball’s chance in hell,” he wrote Tuesday — and from some of his potential successors.
“President-elect Trump’s comments show a complete lack of understanding of what makes Canada a strong country,” Foreign Affairs Minister Melanie Joly said on X. “Our economy is strong. Our people are strong. We will never back down in the face of threats.”
Trump has complained about the size of the US trade deficit with Canada, falsely overstating it as $100 billion or more. Last year the number was $41 billion for goods and services. For goods alone it was about $72 billion, according to US Census Bureau data.
That trade deficit is a direct result of US thirst for Canadian energy. If you remove oil and gas from the equation, the US actually enjoys a significant trade surplus with its northern neighbor, according to calculations by economists at National Bank of Canada.
But Trump and his aides are clearly determined to impose widespread tariffs on US trading partners. Whoever is representing Canada’s interests after Trudeau’s departure won’t be able to win the day on logic alone, Reid said.
“The only way is to have a candidate that combines flattery and persuasion with a dose of resilience. Trump will insist on flattery and the ability to connect,” he said.
But he added: “As soon as you defend the national interest of Canada, that’s going to put you on a collision course of Donald Trump. So it’s how you defend the national interest at the same time that you cajole and compromise with this guy. It’s a hornet’s nest.”
Potential contenders for Liberal leader also include former Finance Minister Chrystia Freeland, former Bank of Canada and Bank of England Governor Mark Carney and former British Columbia Premier Christy Clark. (Carney is the chair of Bloomberg Inc.)
Carney said Monday he’s considering running. In late December, he used social media platform X to push back against Trump’s 51st state comments. “This is carrying the ‘joke’ too far: the casual disrespect, the poor tax math, and ignoring that workers on both sides of our border will be better off if we work together,” he wrote. “Time to call it out, stand up for Canada, and build a true North American partnership.”
Liberal candidates may be able to tap different strengths in portraying themselves as the best option to deal with Trump, said Dan Arnold, a former Liberal pollster and chief strategy officer at Pollara Strategic Insights.
While Carney doesn’t have formal political experience, he has dealt with politicians in his past roles and he may be able to connect with Trump as a business leader, Arnold said. Freeland has direct experience negotiating with Trump, though he disparaged her in social-media posts. And Clark has a reputation for being tough, an attribute Canadians are looking for.
“I don’t know if there’s one candidate who necessarily is going to be seen as the de facto best person to deal with this,” Arnold said. “Trump’s pretty hot and cold. He’s not going to endorse anybody and if he did, they’d probably lose the race because of that.”
The leadership race complicates Canada’s response to tariffs or other measures Trump may impose after his inauguration.
It’s not yet clear whether current ministers would need to temporarily step down from cabinet if they run for leader. The Liberal Party executive hasn’t announced the rules for the contest. The party’s national caucus, which includes about 150 elected lawmakers, is set to meet Wednesday to discuss.
--With assistance from Melissa Shin.
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