Canada's Liberals win minority government; Carney says old relationship with US 'is over'

By David Ljunggren, Ismail Shakil and Rod Nickel

OTTAWA (Reuters) -Canadian Prime Minister Mark Carney's Liberals retained power in the country's election on Monday, but fell short of the majority government he had wanted to help him negotiate tariffs with U.S. President Donald Trump.

The Liberals were leading or elected in 167 electoral districts, known as seats, followed by the Conservatives with 145, with votes still being counted.

The Liberals had needed to win 172 of the House of Commons' 343 seats for a majority that would allow them to govern without support from a smaller party.

"Our old relationship with the United States, a relationship based on steadily increasing integration, is over," Carney said in a victory speech in Ottawa. "The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that, while not perfect, has helped deliver prosperity for our country for decades, is over."

"These are tragedies, but it's also our new reality."

Carney said the coming months would be challenging and require sacrifices.

Shachi Kurl, president of the Angus Reid Institute, a polling firm, told Reuters the Liberal win hinged on three factors.

"It was the 'anybody-but-Conservative' factor, it was the Trump tariff factor, and then it was the Trudeau departure ... which enabled a lot of left-of-center voters and traditional Liberal voters to come back to the party," Kurl said, referring to the resignation of unpopular former Prime Minister Justin Trudeau.

Carney had promised a tough approach with Washington over its import tariffs and said Canada would need to spend billions to reduce its reliance on the U.S. But the right-of-center Conservatives, who called for change after more than nine years of Liberal rule, showed unexpected strength.

Minority governments in Canada rarely last longer than 2-1/2 years.

Conservative leader Pierre Poilievre conceded defeat to Carney's Liberals and said his party would hold the government to account.

The result capped a notable comeback for the Liberals, who had been 20 percentage points behind in the polls in January before Trudeau announced he was quitting and Trump started threatening tariffs and annexation.

"America wants our land, our resources, our water, our country," Carney said. "These are not idle threats. President Trump is trying to break us so America can own us. That will never ever happen."

WAVE OF PATRIOTISM

Trump's threats ignited a wave of patriotism that swelled support for Carney, a political newcomer who previously led two G7 central banks.

Trump re-emerged as a campaign factor last week, declaring that he might raise a 25% tariff on Canadian-made cars because the U.S. does not want them. He said earlier he might use "economic force" to make Canada the 51st state.

Carney has emphasized that his experience handling economic issues makes him the best leader to deal with Trump, while Poilievre tapped into concerns about the cost of living, crime and a housing crisis.

Trump, in a social media post on Monday, reiterated his call for Canada to become the 51st state.

"Good luck to the Great people of Canada," he said. "Elect the man who has the strength and wisdom to cut your taxes in half, increase your military power, for free, to the highest level in the World, have your Car, Steel, Aluminum, Lumber, Energy, and all other businesses, QUADRUPLE in size, WITH ZERO TARIFFS OR TAXES, if Canada becomes the cherished 51st. State of the United States of America. No more artificially drawn line from many years ago."

Tensions with the U.S. have caused supporters of two smaller parties, the left-leaning New Democratic Party and the separatist Bloc Quebecois, to shift to the Liberals. NDP leader Jagmeet Singh conceded defeat in his own district and said he planned to quit as party leader.

The Conservatives appeared on track to make gains in the seat-rich Toronto area to prevent a Liberal majority government, but Poilievre was trailing in his own Ottawa-area district, with votes still being counted.

"We didn't quite get over the finish line yet," Poilievre told his supporters in Ottawa. "We know that change is needed, but change is hard to come by. It takes time."

The Liberals are the last party to win four consecutive elections in Canada, accomplishing the feat in 2004.

Poilievre focused his campaign on domestic issues and the need to fix a country that he said the Liberals had "broken."

(Reporting by Rod Nickel and Promit Mukherjee in Ottawa, Nivedita Balu in Toronto and Amanda Stephenson in Calgary; additional reporting by Susan Heavey in Washington; editing by Deepa Babington, Nick Zieminski and Paul Simao)