The 2025 Canadian election saw Prime Minister Mark Carney’s Liberal Party win a minority government, securing four fewer than the 172 needed for a majority. This result, following ten years of Justin Trudeau’s Liberal leadership, shows a revival thanks to Carney and external forces, especially U.S. President Donald Trump’s trade threats. So, what could be the implications of this election for Canada’s domestic politics and policies, ethnic minorities—particularly the Indian diaspora—and the future of Khalistani politics? And what would be the trajectory of Canada’s relations with the United States, the European Union, and India?
1. Changes in Canada’s Domestic Politics and Policies
Smaller parties, including the NDP and Bloc Québécois, will influence Canada’s domestic political landscape by supporting the Liberal Party’s minority government. Legislative success in Canada’s minority governments often involves compromise via quasi-coalition partnerships. The Liberal platform, which centres on economic resilience, housing, and climate action, will probably dominate the policy priorities in 2025; however, its enactment relies on collaboration with other parties.
The Liberals’ economic platform includes a small income tax reduction for the lowest earners (15% to 14%) and eliminating GST on starter homes priced under C$1 million. These measures tackle affordability, a major voter concern because of increasing living costs. In addition, a $2 billion fund designed to counter U.S. tariffs strategically protects industries such as auto manufacturing. However, the NDP, now with only seven seats, could still advocate for progressive policies such as expanding pharmacare or strengthening worker protections, given their past support of Liberal minority governments. The 22-seat Bloc Québécois could demand special treatment for Quebec, such as vetoing pipelines, thereby complicating national energy plans.
The Liberals aim to revive zero-emission vehicle subsidies and eliminate fossil fuels in government buildings by 2030 as part of their climate policy. Despite this, their support for faster pipelines and energy projects shows a pragmatic approach to weighing environmental concerns against economic realities, primarily due to U.S. tariffs. The success of the proposed carbon border adjustment mechanism, a tax on imports from countries without similar carbon pricing, depends on international cooperation despite demonstrating global climate leadership.
Significant attention will also be given to defence and security policies. Liberal plans to meet NATO’s 2% GDP defence spending goal by 2030, including Arctic sovereignty investments ($420 million) and naval upgrades, to address global instability. Creating a Bureau of Research, Engineering, and Advanced Leadership in Science to improve AI and cybersecurity shows a proactive national security strategy. These ambitious plans, however, could be limited by budget issues, thus requiring careful negotiations within a minority Parliament.
A weakened opposition will further influence the political dynamics. Pierre Poilievre’s Conservatives secured 144 seats, yet Trump’s polarising rhetoric and alleged Indian interference in their 2022 leadership race stalled their advancement. Poilievre’s loss in Carleton underlines the Conservatives’ problems. Jagmeet Singh’s resignation and the NDP’s single-digit electoral showing reduce the left’s power, potentially leaving the Liberals to control progressive policy agendas. Despite this, the Conservatives’ promise of cooperation on U.S. trade issues presents a unique bipartisan chance, although Poilievre’s populist approach could impede enduring collaboration.
Canada’s domestic politics will probably see cautious progress on affordability, climate, and defence, tempered by the need for cross-party support. The Liberals’ ability to navigate these dynamics will determine their governance effectiveness, with Carney’s economic expertise potentially stabilising public confidence.
2. Impact on Ethnic Minorities, Particularly Indians, and the Fate of Khalistani Politics
Historically, Canada’s ethnic minorities (over 26% of the population) have largely supported the Liberal Party because of its strong stance on multiculturalism. This trend is underscored by the 2025 election; however, the implications for the large Indian diaspora—approximately 2.8 million, with 427,000 students—demand a sophisticated analysis, focusing on Khalistani politics.
Suburban Toronto and Vancouver see a strong, reliably Liberal voting bloc amongst the diverse Indian diaspora. Strained relations between Canada and India have exacerbated existing Hindu-Sikh tensions, resulting in community divisions. A more inclusive environment for Indo-Canadians could result from the Liberal win and Carney’s commitment to rebuilding ties with India. Policies such as tax cuts and housing incentives will aid diaspora communities struggling economically, and continued high Indian immigration will maintain cultural and economic contributions.
However, Khalistani politics is the election’s most important consequence for the Indian diaspora. The NDP, linked to pro-Khalistani views under Jagmeet Singh’s leadership, faced a crushing defeat, plummeting to seven seats and losing official party status. With his loss in Burnaby Central, Singh’s resignation signals a pivotal moment. His vocal support of Khalistani causes, especially his calls for sanctions against Indian officials regarding the 2023 Hardeep Singh Nijjar killing, upset some voters and damaged Canada-India relations. Social media hails Singh’s defeat as a setback to Khalistani influence, signifying a widespread rejection of the NDP’s and his approach.
This result might shrink the political room for Khalistani support in Canada. Separatist language that threatens the relationship with India—a key trading partner and immigration source—is unlikely to be tolerated by the Liberals under Carney. Carney may reverse Trudeau’s apparent tolerance of Sikh separatists, a policy highlighted by India’s 2024 expulsion of diplomats following Nijjar’s death. Rebuilding bilateral ties is his focus, suggesting a harder line against extremist elements in the Sikh diaspora, potentially by more closely monitoring rallies or fundraising channels linked to Khalistani groups.
This shift could ease worries among some Hindu Canadians in Brampton about anti-Hindu bias, concerns voiced by temple attendees. Conservative outreach to Indo-Canadian voters, focused on law and order and trade ties with India, didn’t weaken Liberal support, implying Hindu voters are still hesitant about Poilievre’s populist messaging. Yet, Conservative success in immigrant-heavy ridings reveals shifting political allegiances, potentially impacting Liberal dominance if economic conditions decline.
Enhanced employment insurance and investments in Indigenous infrastructure (e.g., $94 million for Nunavut power plants) will continue to benefit Black, Indigenous, and other minority ethnic groups by addressing systemic discrimination under Liberal policies. The Liberals’ focus on U.S. trade and relations with India may shift attention from domestic issues, thus requiring more advocacy from already weakened progressive groups like the NDP.
As a result, economic policies and closer Canada-India relations help the Indian diaspora, but hinder Khalistani politics. To prevent a resurgence of community tensions, the Liberals need to reconcile diaspora inclusion with national unity.
3. Canada’s Relations with the USA, European Union, and India
With the 2025 election results, Canada’s foreign relations with the U.S., EU, and India stand at a pivotal moment, marked by both difficulties and potential benefits.
United States
Given Trump’s aggressive trade tariffs and provocative talk of annexation, Canada’s relationship with the U.S. is its most significant worry. Carney’s nationalist-driven victory, spurred by Trump’s “51st state” comment, paves the way for difficult but practical negotiations. Trump’s inclination towards cooperation with Liberals, as indicated by his post-election call with Carney, suggests openness to collaboration. Yet, his administration’s focus on fentanyl and migration will pressure Canada to conform to U.S. policy.
To lessen Canada’s economic reliance on the U.S., the Liberals suggest a $2 billion fund to lessen tariff effects and a stronger domestic supply chain. Carney’s proposed “new economic and security relationship” with the U.S. might result in a revised trade agreement that includes defence partnerships. Conversely, Canada’s investment in NATO and Arctic sovereignty suggests a drive for independence, which might conflict with Trump’s hope for compliance. Pete Hoekstra’s appointment as U.S. ambassador, focusing on trade and security, provides a diplomatic path towards better relations; however, Canada’s minority government might face difficulties in making significant concessions without opposition backing.
European Union
Strengthening bonds with like-minded allies, especially the EU, is central to the Liberals’ foreign policy. Carney’s proposal to boost trade ties with the EU and UK displays a plan to reduce over-reliance on the U.S. Given trade issues with the U.S., the EU is expected to positively receive Canada’s proposals, mainly those focused on climate action, like the carbon border adjustment mechanism. Defence partnerships, like Canada’s participation in the ReArm Europe initiative, may strengthen transatlantic security collaboration.
Canada’s energy exports might be affected by the EU’s Ukraine and Russia-related policies (which the Liberals support), complicated further by Quebec’s rejection of Conservative pipeline plans intended to help Ukraine. While the EU’s congratulatory messages, including Macron’s praise of Carney, show diplomatic goodwill, actual agreements depend on overcoming Canada’s internal hurdles. Though a minority government’s limited power could hinder progress on ambitious EU trade deals, common ground on multiculturalism and climate action offers a solid base.
India
Under Prime Minister Mark Carney, Canada and India aim for a cautious improvement in their relationship, which reached its nadir in 2023 amidst the Nijjar killing allegations. Rebuilding ties with India was central to Carney’s campaign, given India’s position as Canada’s tenth-largest trading partner in 2022 and a vital source of immigration and students.
A key development on April 29, 2025, suggesting an improving relationship was Indian Prime Minister Narendra Modi’s congratulatory message to Carney. The NDP and Jagmeet Singh’s election loss have reduced the influence of pro-Khalistani voices, thereby mitigating one of India’s primary concerns about separatist activities in Canada.
Carney’s administration plans rapid action against Khalistani extremism and stalled trade talks from 2024. Progress on a Comprehensive Economic Partnership Agreement (CEPA), or interim trade deals, may soon follow. Although the pro-Khalistani groups’ impact has lessened, domestic concerns remain. Balancing Liberal multiculturalism and the need to mend ties with India and reassure Hindu-Canadian voters is Carney’s challenge, given the outspoken Sikh diaspora.
Immigration, education, and business will build people-to-people relationships that foster long-term reconciliation. Yet, restoring high-level diplomatic trust, significantly eroded in the last few years, will demand time and careful nurturing.
As Canada and India aim for more influence in the changing Indo-Pacific, a stronger partnership benefits them both strategically. The next few years will determine if this slow warming leads to a permanent shift.
Conclusion
Canada enters a cautiously optimistic era following the Liberal Party’s minority government victory in 2025 under Mark Carney. At home, progress on affordability, climate, and defence policies will hinge on overcoming a divided Parliament. Economic measures and reduced Khalistani sway could uplift Indo-Canadians and other minorities, but community issues need sensitive handling. Balancing U.S. trade pressures, improving EU relations, and renewing ties with India are key components of Canada’s foreign policy. While Carney’s economic knowledge and diplomatic style equip him for leadership, the minority government’s fragility could challenge his capacity to fulfil his aims. Canada’s 2025 election initiated a renewal process, however, its triumph depends on national unity and an adept global strategy.
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