OTTAWA (BLOOMBERG) - Canadian Prime Minister Justin Trudeau won a second term in national elections, displaying once again a remarkable ability to overcome scandal and controversy to remain in power.
Trudeau’s Liberal Party won or was leading in 155 of Canada’s 338 electoral districts, losing his majority in Parliament but gaining enough seats to secure a stable government with support from smaller parties.
The most likely partner for Trudeau would be the pro-labour New Democratic Party (NDP), which is on track to win 25 seats, giving the two parties a combined 180.
While his minority position weakens his mandate, the result will nonetheless come as a relief for Trudeau, 47, who entered the campaign wounded by a scandal over his handling of a judicial case for a Quebec engineering firm, and was further rocked by revelations he wore blackface at least three times when he was young.
The scandals weren’t enough to derail Trudeau’s campaign, which sought to portray the prime minister as the only real progressive option and to frame the election as an opportunity to consolidate his gains on climate change.
The prospect of a relatively stable minority government sparked little market reaction, with the Canadian dollar trading little changed.
US President Donald Trump congratulated Trudeau on his victory.
"Congratulations to Justin Trudeau on a wonderful and hard fought victory. Canada is well served," Trump said on Twitter. "I look forward to working with you toward the betterment of both of our countries!"
The second term would allow the Liberal leader to cement one of the most left-leaning agendas the country has seen in at least a generation – progressive on social issues, willing to run deficits to tackle income disparities, assertive on climate change and fervently internationalist in an era of populism.
The push to the left would be accelerated if the Liberals are forced to team up with the NDP, an alliance that will produce some trepidation in Canada’s energy sector, already saddled with reduced oil prices due to pipeline bottlenecks.
Trudeau can also turn to other parties for support on a vote-by-vote basis.
One potential flash point may be the proposed expansion of the Trans Mountain pipeline, which would carry crude from Alberta to a port near Vancouver.
Trudeau’s government bought the pipeline last year to save its expansion after the previous owner, Kinder Morgan Inc, walked away.
The NDP is anti-pipeline, and wants more aggressive moves to combat climate change and higher taxes for companies and the wealthy.
Yet, if history is any guide, the Liberals will only need to make moderate concessions to remain in power, without undermining the nation’s finances or key economic objectives, which includes constructing the Trans Mountain pipeline that the NDP opposes.
"While there are some residual political uncertainties, we’re not likely to see dramatic changes from the broad outlines of the Liberal platform, or for that matter, even from where policies were headed prior to the vote," Avery Shenfeld, chief economist at Canadian Imperial Bank of Canada, said in a note to investors.;
Still, Trudeau will need to navigate carefully following a result that represented an undeniable rebuke of his performance over the past four years, without altogether turfing him from power.
The Liberal seat result is well off the 184 the party won in 2015, when Trudeau swept to power with a majority government.
The Liberals also won with the lowest share of the popular vote – currently at 33 per cent – for any governing party in the nation’s history, even trailing the rival opposition Conservative Party which won about 34 per cent of ballots cast.
He’s also now overseeing a more divided nation than the one he inherited.
The results exposed a stark regional divide.
The Conservatives – which have championed the oil sector – were on pace to finish second with at least 122 districts, with the bulk of those in the four western provinces.
The Bloc Quebecois are on pace to finish with 32 districts, more than triple their tally from 2015. The Liberals won only 15 seats west of Ontario.
There is also a deep fault line between rural Canada and the nation’s biggest cities.
The Liberals relied heavily on big wins in Toronto and Montreal to stay in power, and are governing with hardly any districts outside of large cities and Atlantic Canada.
The outcome however likely ensures the survival, for now, of a national carbon price, introduced by Trudeau.
The Conservative Party had campaigned against the tax scheme, which also includes payments made to households as an offset. It also may mean Trudeau will need to ramp up spending even more than promised.
The Liberals pledged to increase the government deficit to C$27.4 billion (S$28.51 billion) next year to fund new campaign promises, bringing it above 1 per cent of gross domestic product for the first time since 2012.
That’s even before any new measures needed to accommodate requests from the NDP that may be needed in order to win their support.
NDP leader Jagmeet Singh has said he will lay out six requests to support any government in a minority Parliament: a universal pharmacare plan and national dental care, investments in affordable housing, waiving interest on student loans, a "bold" plan on climate change, a tax on wealth and a price cap on mobile phone bills.
The Liberal Party is already pledging about C$10 billion in new annual spending by 2023 to finance a slew of new promises, including more generous child benefit payments and employment insurance, extra funding for post-secondary education, and an increase in the old age supplement for low-income pensioners.
Trudeau’s victory amounted to a rejection of Conservative Leader Andrew Scheer, who failed to extend his party’s strength in the energy-rich prairies into breakthroughs in Ontario and Quebec, Canada’s two most populous provinces.
Scheer campaigned on a small-government, pocketbook-issue platform akin to his predecessor, Stephen Harper, who governed Canada from 2006 to 2015.
But the Conservatives didn’t poll much better than they did ahead of their 2015 loss.
Trudeau’s minority government is the fourth in Canada’s past six elections. Harper governed through two minorities before finally winning a majority.
Trudeau’s father, former prime minister Pierre Trudeau, was cut down to a minority in his second mandate, before winning two more majorities over the course of his political career.