Inside the Freeland fallout: How Trudeau’s leadership came under fire

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At about 8:45 on Monday morning, Prime Minister Justin Trudeau arrived on Parliament Hill, his motorcade gliding to a stop in front of the ornate set of wooden doors used almost exclusively by him.

But instead of immediately getting out, Mr. Trudeau stayed in the back seat of the black SUV, on the phone.

On the other end of the line: his deputy prime minister and finance minister, Chrystia Freeland.

That afternoon, she was set to deliver the fall economic statement. But she was calling Mr. Trudeau to quit.

Now, Mr. Trudeau might be on the brink of stepping down as Liberal Leader, tossing his party into a leadership race and destabilizing the government ahead of a potential trade war with the United States.

And Ms. Freeland, once known as a strong Trudeau loyalist, is being heralded for forcing that reckoning.

Over the last five days, The Globe and Mail has spoken with 38 people, including ministers, Liberal MPs, senior political staff, government officials and Liberal Party insiders, for the story of what led to one of the most stunning days in modern Canadian political history – and what might happen next.

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Where it all began

That a break-up with Ms. Freeland could push Mr. Trudeau out of office sees the pair’s relationship come full circle.

She was the first high-profile candidate recruited after he became leader in 2013, and when he appointed his first cabinet, she was on the front bench right away.

In 2020, Mr. Trudeau and his then-finance minister Bill Morneau had a very public falling out, elements of which would repeat themselves four years later with Mr. Trudeau and Ms. Freeland.

The Globe and Mail reported that tensions between the two men centred around a disagreement on spending: Mr. Morneau was uncomfortable with the down-line implications of pushing billions out the door in pandemic relief, while Mr. Trudeau wanted more spending and for it to move faster.

Mr. Trudeau was also seeking economic advice from former Bank of Canada governor Mark Carney and trying to recruit him – a move seen as undercutting Mr. Morneau.

A similar scene would play out for Ms. Freeland. Her exit was precipitated by Globe and Mail reports in July and then again in December, about Mr. Trudeau trying to bring Mr. Carney – the godfather of one of her children – into the fold, and also clashes between her and Mr. Trudeau over spending versus cuts.

Ms. Freeland was appointed finance minister to replace Mr. Morneau. At the time, she was asked by reporters whether she’d be prepared to say no to the Prime Minister if necessary. She said they hadn’t always agreed in the past.

“I think both of us felt that having those different points of view and having an ability to have an open, respectful, candid conversation about those different points of view collectively brought our government to a better decision.”

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The deficit days

When Ms. Freeland took over Finance, she was seen as more ideologically aligned with Mr. Trudeau, and thus – unlike Mr. Morneau – would be more comfortable with deficit spending.

The budgets released on her watch included billions in deficit spending, even as the pandemic-related crunch eased and inflation began to rise. The Bank of Canada began raising interest rates, and those, coupled with inflationary pressures, saw the government suddenly in the midst of a cost-of-living crisis but continuing to spend.

“It would be helpful if monetary and fiscal policy was rowing in the same direction,” Bank of Canada Governor Tiff Macklem said in the fall of 2023, in a comment widely seen as an unusual rebuke of government spending.

Ms. Freeland was viewed as indifferent in 2022 when she talked about cancelling her Disney+ subscription as a cost-saving measure, prompting thousands of letters to her office. In late November of this year, her use of the term “vibecession” drew heavy criticism as being a suggestion that people weren’t struggling economically, only feeling bad.

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A summer of discontent and a fall revolt

By the spring of 2024, the Conservatives, under Leader Pierre Poilievre, had cemented their lead in the polls.

In June, Liberal candidate Leslie Church – Ms. Freeland’s former chief of staff – was defeated in a by-election for the traditionally safe seat of Toronto-St. Paul’s. It was the first time since 2015 that the Liberals had lost a seat in Canada’s most populous city.

A torrent of criticism followed. There were calls from backbench MPs and former Liberal cabinet ministers for the Prime Minister to reconsider his future, change his staff and shake up his cabinet, including his finance minister.

In July, The Globe reported that Mr. Trudeau’s chief of staff, Katie Telford, and other officials in the Prime Minister’s Office were criticizing Ms. Freeland, saying she wasn’t effective in communicating the government’s financial policies and wasn’t doing enough to win over members of the caucus.

Mr. Trudeau tried to tamp down the suggestion he was at odds with Ms. Freeland, telling reporters in Washington that she was a “critical and essential” member of the team and he was confident in her abilities.

But he also acknowledged he had spoken to Mr. Carney about joining the government.

Those overtures rankled Ms. Freeland, said one senior Liberal.

“You had stories since the summer, but nobody would say anything publicly or to her face,” a second Liberal source said. “It just doesn’t work if the PM and the finance minister are not hand in glove.”

In September, Mr. Carney travelled to Nanaimo to address the Liberal caucus during its retreat, and he was announced as the head of a Liberal Party task force on economic growth.

Opposition Conservatives framed Mr. Carney’s appointment as Ms. Freeland getting pushed aside – something she denied, telling reporters she spoke to Mr. Carney often and being able to draw on his counsel was a positive.

Meanwhile, the Liberals lost a by-election in Montreal in September, reigniting demands from MPs, Liberal Party insiders and strategists for Mr. Trudeau to leave. A movement began to get MPs to band together in sufficient numbers to force Mr. Trudeau to leave, though it seemed to fall apart within days.

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Trump returns

On Oct. 28, Mr. Trudeau, senior PMO staff and Ms. Freeland had a lengthy budget-planning meeting. She communicated the need to rein in spending, pointing to a recent announcement on mortgage reforms as an example of how the government could help people without adding to the deficit. But the appetite in the PMO was for new spending programs to address affordability.

Mr. Trudeau’s office wanted to offer Canadians more pocketbook policies, suggesting GST relief and rebates, and in October, discussions began on how to deliver it.

Ms. Freeland brought forward a time-limited, federal sales tax holiday on certain consumer goods and services. Later, when the plan was announced, it included a pledge to give working Canadians earning less than $150,000 a $250 cheque.

The Finance Department viewed the $6.28-billion plan as fiscally unwise. It also did not meet with universal public approval. Small businesses were concerned about how they’d implement the GST changes at the cash register. Senators made it clear they thought the policy was ill-conceived, and at least one poll found Canadians weren’t rewarding the Liberals with more support because of it.

In the midst of all of this, the U.S. election was under way, and Republican candidate and former president Donald Trump said he’d impose tariffs on foreign imports upon his re-election.

Four days after the GST announcement, Mr. Trump surprised Canada with a social-media post saying that on his first day in office, he’d impose 25-per-cent tariffs over what he perceived was a lax attitude towards border security and drug smuggling.

From then on, Ms. Freeland, in her conversations with the PMO, insisted that the priority of the government had to be preparing for the promised tariffs. She also called a business contact and got Mr. Trump’s cellphone number to share with Mr. Trudeau so he could call the president-elect directly to press Canada’s case, according to a confidant of Ms. Freeland.

On Nov. 30, Mr. Trudeau flew to Florida to meet with the newly elected president. Ms. Freeland, a key member of the team who had negotiated with his administration the first time around, wasn’t invited.

Mr. Trump hadn’t been a fan of hers during the first round of talks; after she quit, he posted on social media that she was “toxic” and wouldn’t be missed.

Mr. Trump did not notice her absence from the dinner at first. Two Liberal sources told The Globe he briefly mistook Mr. Trudeau’s chief of staff, Ms. Telford, for Ms. Freeland.

When Ms. Freeland was later asked by reporters why she wasn’t at the dinner, she said it was a question for Mr. Trudeau, adding she thought it was the right choice given border security was the topic at hand. Privately, however, she told people she was puzzled at not being invited to Mar-a-Lago, a Liberal source said.

In a meeting at her office on Dec. 2, Mr. Trudeau told Ms. Freeland that he wanted her to stay as Finance Minister, two sources said. But Ms. Freeland had doubts that was the case, telling people she felt she was being “Bill Morneau-d,” the sources said.

On Dec. 10, The Globe reported that tensions between Ms. Freeland and Mr. Trudeau were building, over affordability policies. When challenged by the Conservatives to defend Ms. Freeland in Question Period, Mr. Trudeau did not, but instead defended his spending.

On the evening of Dec. 11, the Prime Minister and his office pulled out from the fall economic statement $12-billion in cuts that Ms. Freeland had been advocating, according to two sources.

The move undercut Ms. Freeland’s demand that there must be planning for a potential trade war, not more financial supports directly to Canadians.

Trudeau told Freeland that Carney would replace her as finance minister over Zoom

Opinion: Freeland’s political estrangement from Trudeau is both shocking and understandable

The earthquake

On Dec. 12, PMO staff asked for a meeting between the two for the next day, not an unusual ask given the fall economic update was to be released in four days.

In the video call on Dec. 13, Mr. Trudeau informed Ms. Freeland that Mr. Carney was coming to replace her at Finance. She was offered a special cabinet post in charge of Canada-U.S. relations, but without a portfolio, and was told the shuffle would take place after she had delivered the fall economic statement.

That meant she would have no departmental staff, no money and no statutory authority. She pushed back, according to two sources, saying the stakes were too high with Mr. Trump for her to have a position with little power.

The Prime Minister’s Office contends this was not a demotion, multiple sources said: She would be responsible for managing the single biggest issue facing the government and the economy.

“If you are the boss, and days before the economic update you say, ‘I am going to move you right after you deliver the fall economic statement,’ I can’t understand how that was thought as smart unless they just thought she would go along with whatever,” said a confidant of Ms. Freeland.

Ms. Freeland had a second call that evening with a senior PMO official, who tried to explain to her why the job was a good fit. The call ended with her still not accepting the job, two sources said.

That weekend, Ms. Telford posted photos of herself in New York City, with a caption thanking people for minimizing the number of calls she was getting. It did not land well with Ms. Freeland’s team.

“Obviously they didn’t think seriously about the ramifications of that conversation on Friday at all,” Ms. Freeland’s confidant said.

It is unclear whether Mr. Carney had accepted the offer to join the government. Two sources close to him suggested over the weekend that he was not willing to be part of this government even though he did not immediately close down discussions. A third source said one of the key questions the former central banker asked the Prime Minister’s team was whether Ms. Freeland was on board with the change.

Sources close to Mr. Carney said they are uncertain why Mr. Trudeau told Ms. Freeland he was taking the job. They said he was pitched on joining a team of new people about to come into government and that Ms. Freeland was going to be part of the team.

Mr. Trudeau’s advisers say the Prime Minister believed Mr. Carney had made the commitment but they realized over the weekend that he wasn’t on board. Mr. Carney did not respond to questions from The Globe.

Then everything fell apart on Monday.

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The aftershock

The time stamp on the photo of Mr. Trudeau getting out of his car Monday morning was 9:02 a.m. Five minutes later, Ms. Freeland’s resignation letter was posted to social media.

In it, she accused Mr. Trudeau of not taking the threat of Mr. Trump seriously and focusing too much on political-spending gimmicks.

In the wake of her resignation and the letter, chaos reigned. For hours, no one knew who the finance minister was, whether a fall economic statement would be delivered, or even if the government would survive the day. Cabinet ministers on Parliament Hill tried their best to avoid reporters in hallways and stairwells but those who stopped were visibly shocked, and many declined to give full-throated support to the Prime Minister.

As cabinet met, Innovation Minister François-Phillipe Champagne, Immigration Minister Marc Miller and then-public safety minister Dominic LeBlanc went into a room with Ms. Telford to discuss who could take the Finance job, a government official said.

Mr. Trudeau ultimately asked Mr. LeBlanc, whom he’s known since he was a child. A savvy political operator, Mr. LeBlanc has never held any economic portfolio and is not known for his expertise in financial matters – a view shared on Bay Street.

Mr. LeBlanc was sworn in and Mr. Trudeau left Rideau Hall to meet with MPs. Ms. Freeland was among those at the hastily called caucus meeting.

MPs asked what had happened. The Prime Minister, in his reply, implied there was more to the story than was captured in Ms. Freeland’s letter.

“Cabinet ministers serve at the pleasure of the prime minister,” said Joyce Murray, who was one of several senior Liberals shuffled from cabinet in 2023 to make way for fresh blood.

“And so I see loyalty as being a very important value in this business.”

A walk in the snow

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Though he showed up with forced good cheer at Liberal Christmas social events on Monday and Tuesday, behind the scenes Mr. Trudeau and his inner circle are reeling.

Even some of his most loyal friends and colleagues are furious, using words like like “colossal” and “inexcusable” to describe what they say was the mistake he made in his approach with Ms. Freeland. Those inside Mr. Trudeau’s office now admit they didn’t handle things as well as they could have.

In the immediate aftermath of Ms. Freeland’s departure, calls for Mr. Trudeau’s own exit came swiftly. A number of sources described a “bunker mentality” to Mr. Trudeau’s inner circle and their effort to determine how he could stay on.

By late Thursday, The Globe was reporting that the Prime Minister was discussing all options for his future.

By Friday evening, 21 Liberal backbenchers demanded that he leave – more than one in every 10 caucus members. The NDP also now says it will vote down the government at the first opportunity.

As for Ms. Freeland, the question of what’s next is an open one.

In an e-mail sent out to current and former staff the day after she left, she said her decision was not easy but the right one to make.

“It will, of course, be a challenging few days, but this will not be the end of the road!”