Canada is back. Back again. Maybe for real this time. 

Foreign Affairs Minister Mélanie Joly reset Canada’s international policy for a messier world this week, delivering a speech in Toronto that could be read as an acknowledgement that influence abroad has become more difficult than sewing a maple leaf on one’s backpack. 

“Now more than ever, soft and hard power are important,” Joly told an audience assembled by the Economic Club of Canada, a significant statement from a government that has so far been fine with missing its NATO commitment to spend two per cent of gross domestic product on defence for the duration of its eight years in power. 

For some, that is stating the obvious. But it represents a considerable distance of travel since Justin Trudeau said this in his victory speech on Oct. 20, 2015: “I want to say this to this country’s friends all around the world. Many of you have worried that Canada has lost its compassionate and constructive voice in the world over the past 10 years. Well, I have a simple message for you: On behalf of 35 million Canadians, we’re back!”

It was a statement that captured not only Trudeau’s naiveté about what it took to be a player in the world, but also a generation of Canadians who grew up in a world in which their country had been on the winning side of the Cold War and free trade would lead China to embrace democracy. History was over, or so it was said. Joly began her speech with remarks on the Israel-Hamas war, which she said had so far resulted in the confirmed deaths of seven Canadians and had left 400 others trapped in Gaza. Another reminder that history wasn’t over, it was only on pause. 

That pause led to complacency. So far, Trudeau has taken a beating in the international arena. His attempt to negotiate a free-trade agreement with China proved overly optimistic, as the two countries are now closer to enemies than friends. 

Talk of diversifying trade relationships was undermined by the decision to focus on little besides renegotiating the North American Free Trade Agreement between May 2017 and October 2018. 

Humiliation arrived in 2020 when Canada lost its bid for a temporary seat on the UN Security Council to Norway and Ireland. And then, last month, Trudeau informed the House of Commons that authorities had evidence that Indian agents might have been involved with the murder of a Canadian citizen on Canadian soil, sparking an international incident.  

Bad luck? Sure, to some extent. Few were talking about China taking such an authoritarian turn a decade ago, and Indian Prime Minister Narendra Modi was widely seen in the West as an economic reformer, and not so much as the Asian strongman that he’s become. And no one saw Donald Trump coming. 

Yet here we are. Geopolitics is now a major macroeconomic risk, so much so that multinational companies such as Microsoft and Hitachi are hiring former diplomats and international-relations experts as advisers, and Goldman Sachs last week unveiled the Goldman Sachs Global Institute to offer advice on geopolitical and technological change. Joly’s choice of venue—the Economic Club of Canada—also underscored that diplomats and executives need to learn from one another. 

Maybe the chaos from wars in Europe, Africa and the Middle East and a Great Power showdown between China and the U.S. would have been less chaotic if Trudeau had started with a foreign policy based less on nostalgia and more on realpolitik. Second best will be adjusting in (relative) real time, rather than accepting the delays that have come to characterize this government’s approach to decision-making—the Indo-Pacific Strategy released in November 2022 after years of discussion being one example. 

Joly’s speech appears to be the end of whatever dalliance Ottawa had with making “friendshoring” official policy. Deputy Prime Minister Chrystia Freeland seized on the idea last year as a response to Chinese and Russian aggression, advocating for democratic countries to base trade agreements and supply chains on values, rather than comparative advantage alone. 

If only life were so simple. Canada’s troubles with India, often characterized as the world’s largest democracy, show the limitations of dividing a world shaped by decades of hyper-globalization into good guys and bad guys. Such a policy also would limit Canada’s options by putting it squarely in the U.S.’s orbit. Economic gravity might do that, anyway, but that’s all the more reason for policy to push for optionality. 

“We must resist the temptation to divide the world into rigid ideological camps,” Joly said in both English and French, suggesting it was a point she was unwilling to risk losing to translation. “The world cannot be restricted to democracies versus autocracies,” she continued. “Forcing the majority of the world to fit into any one category would be naive, shortsighted and counterproductive.”

It would also be naive to take the Trudeau government at its word, based on its track record. Joly said Defence Minister Bill Blair will soon have more to say on how Canada will ensure it can project hard power in the Pacific—where allies such as Japan and South Korea will be looking for help protecting trade routes and Taiwan’s place as the leading maker of advanced computer chips, among other things—and safeguard the Arctic, and especially the Northwest Passage. She said Canada would continue to support Ukraine’s fight against Russia, and be there to help it rebuild after the war is over. And in a nod to the Middle East, Joly reiterated Canada’s appointment of a new ambassador to Saudi Arabia in May, ending a five-year chill related to Canada’s criticism of the kingdom’s record on human rights. 

So, we’ll know for sure that Canada is back when Freeland, who is also the finance minister, releases her fall fiscal update. Hard power is expensive, and Canada’s post-COVID debt has become more difficult to finance because of higher interest rates. Trudeau will demonstrate the kind of country he wants Canada to be by the choices he makes. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.