The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Pranav Kiran

TORONTO, April 29 (Reuters Breakingviews) - Donald Trump is on a self-declared mission of American revitalization. He’s resurrecting the fortunes of his political foils first. In polls held Monday, the Liberal Party and its leader, Prime Minister Mark Carney, won a renewed mandate from Canadian voters, though fell short of securing an outright parliamentary majority. Still, it’s a remarkable turnaround from a prior polling slump, fueled by backlash to U.S. trade policy that Carney charges is trying to “break” Canada “so America can own us.” Prediction markets foresee his Australian counterpart Anthony Albanese pulling off a similar reversal. But while standing up to Trump’s public broadsides makes for a winning message, actually resolving disputes as the $2.1 trillion economy faces down a host of persistent problems is much tougher.

Canada depends on the United States for three-fourths of its exports and nearly half of imports. Despite suspending some measures, Trump-imposed levies on the likes of automobiles and steel affect key industries. If trade tensions don’t cool down, the Bank of Canada’s most pessimistic forecast calls for GDP to contract for a full year and only gradually recover from there.

That’s after an already disappointing run under Carney’s predecessor, former Liberal Prime Minister Justin Trudeau. Canada’s productivity growth trailed the U.S. between 2014 and 2023, outpacing only Italy and France among G7 economies. And while tensions with its southern neighbor are in the spotlight, internal trade barriers between provinces are so high that the IMF in 2019 estimated that removing them could boost GDP per capita by about 4 percent.

Most pressingly, a supply-demand imbalance is squeezing the housing market. It would take building 3.5 million units above trend by 2030 to close the gap, according to the Canada Mortgage and Housing Corporation. Though down from its peak, shelter services inflation was more than double its historical average in March. That could explain why younger Canadians still favored the cost-of-living-focused message of Carney’s Conservative opponent, according to pre-election polls.

Tax tweaks could help. John Lester, a fellow at the C.D. Howe Institute, argues for shifting business subsidy rates in favor of larger firms, rolling back proposed increases in capital gains levies and cutting corporate taxes to encourage investment. Even then, this would not quickly solve chronic issues like Canada’s meager spending on research and low realized productivity gains from patents.

And despite Carney’s much-touted crisis-management skills, drastically reshaping policy is no easy feat. Any tax hikes to offset lower rates for corporations will be unpopular. The federal government can only move the needle so much on housing, which is stymied by local regulation. Interest groups have successfully defeated internal trade liberalization for decades. Trump is a useful bogeyman. Eventually, though, real results – or lack thereof – will speak for themselves.

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CONTEXT NEWS

The Liberal Party of Canada, led by Prime Minister Mark Carney, retained power in parliamentary elections held on April 28. Preliminary results from Elections Canada showed the party leading or elected in 168 electoral districts. The opposition Conservative Party leads in 144 districts.

If it holds, the result leaves the Liberals short of the 172 seats needed to secure an outright majority of the House of Commons.

(Editing by Jonathan Guilford and Maya Nandhini)

((For previous columns by the author, Reuters customers can click on KIRAN/pranavkiran.t@thomsonreuters.com))