Los Angeles/Ottawa (OTE) – From dissatisfaction with the Trudeau
government to dissatisfaction
with Trump’s policies — compounded by general anxiety around tariffs,
the economy and a deteriorating relationship with the U.S. —
navigating an economic downturn should be an immediate priority for
Canada as it heads into a federal election, a new report recommends.

In the long-term, however, it says Canada will need greater
economic diversification and regional representation.

“Although it is wealthy by global standards, Canada’s economy
faces key vulnerabilities such as excessive reliance on extractive
industries, shortages of critical goods like housing and heavy
dependence on exports to the U.S.,” states a Canada BGI Report on the
country’s governance performance, released a little more than ten
days before the April 28 federal election.

The report, based on the Berggruen Governance Index (BGI) , was
conducted by researchers from the Los Angeles-based Berggruen
Institute think tank, the Luskin School of Public Affairs at the
University of California Los Angeles (UCLA) and the Hertie School, a
German university.

Currently, Canada ranks only 48th on the Economic Complexity
Index. “Given its wealth, this is a disproportionately low figure and
increasing it should be a top priority,” said the report.

The Berggruen Governance Index (BGI) Project analyzes the
relationship between democratic accountability, state capacity and
the provision of public goods to develop a deeper understanding of
how governments can create a more resilient future for their people.

While Canada scores highly on most measures of the BGI, the
report found that Canada’s performance “has been uneven over the last
decade” and for many years has failed to address systemic problems.

These problems, however, have been overshadowed by U.S. President
Donald Trump.

Until recently, analysts predicted a landslide victory for the
Conservatives under Pierre Poilievre, since the Liberals, under
former Prime Minister Justin Trudeau, had become deeply unpopular
over numerous policy decisions, including immigration.

But the Liberals have “experienced one of the most dramatic
electoral turnarounds in recent political history,” according to the
Canada BGI Report, attributing the ascension of Trump to the U.S.
presidency in January 2025 to this reversal of fortunes.

This reversal also coincided with the resignation of Trudeau and
the selection of former Bank of Canada and Bank of England Governor
Mark Carney as the new Liberal leader.

“Repeated threats of tariffs and even territorial annexation
provoked outrage among Canadians and ignited a surge in patriotic
sentiment, to which Poilievre’s defeatist ‘Canada is broken’ rhetoric
was particularly ill-suited,” the researchers wrote.

Carney has rallied Canadians around national unity — and managed
to solidify a poll swing back to the Liberals. What seemed like an
inevitable win for the Conservatives just a few months ago has become
a close race to the finish line.

While the Canada BGI Report found that Carney’s vision of “One
Canadian Economy” appears to be a politically successful response to
the crises Canada faces from the U.S., in the long-run Canada will
need to contend with “persistent economic tensions” and “overcome
governance challenges that predate both Trump and Trudeau”, the
report said.

The BGI scores for state capacity and democratic accountability
“trail those of many Western European peers,” according to the
report, with institutional accountability falling by seven points
from 2000 to 2021.

This indicates disillusionment with Canada’s institutions;
researchers found that public trust in government steadily declined
throughout the 2010s. “Coupled with eroding faith in democratic
institutions and lingering regional tensions, the previous
unpopularity of Trudeau’s Liberals appears to reflect systemic issues
rather than an anomaly,” according to the Canada BGI Report.

A major flashpoint for Canadians is immigration. Canada has long
been a supporter of greater immigration but, by 2024, public
sentiment had shifted — helping to propel the Conservatives to the
top of the polls. Canada’s international migration surged 15-fold
under Trudeau — with the aim of meeting the country’s current labour
shortage — but Ottawa started coming under fire for housing
inflation.

Canada has one of the highest housing price-to-income ratios in
the developed world, according to the OECD. One reason is stagnant
homebuilding, with the number of dwellings per 1,000 residents far
below the G7 standard. With homeownership rates declining, that has
led to increasing backlash toward immigrants and newcomers.

Canada has also struggled with excessive reliance on extractive
industries and heavy dependence on exports to the U.S. With current
tensions between Canada and the U.S., “reliance on both oil and
exports remains a major feature of the country’s economy and has
recently been exposed as a geoeconomic vulnerability,” according to
the researchers.

However, the persistent challenges of regional representation and
limited state capacity “will make it increasingly challenging to
enact far-reaching plans for economic integration and greater
political sovereignty.”

The report said that addressing these challenges will require
investments in state capacity, economic diversification — both
sectorally and geographically — and building greater democratic
legitimacy through regional inclusion.

Researchers recommend the next government “complete Trudeau’s
unfinished goal of introducing a proportional representation system”
that includes greater geographic representation and inclusion of
First Nations peoples, which will be “critical for increasing
legitimacy and national unity.”

Polls now project a Liberal majority in the House of Commons.

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