Eurasia Group | Top Risks 2024: Implications for Canada

Top Risks 2024: Implications for Canada

Eurasia Group's Top Risks of 2024

Top Risks is Eurasia Group's annual forecast of the political risks that are most likely to play out over the course of the year. This year's report was published on 8 January 2024.

Not long ago, Canadians could be forgiven for thinking that geopolitical risk was something that affected other countries. Protected by three oceans and a powerful, democratic neighbour, one 20th century politician characterized Canada as a “fireproof house far from inflammable materials.” 

That sense of invulnerability—that Canadians could engage with the world on their own terms, often pursuing niche issues or joining coalitions led by more powerful friends—has been shattered in recent years. From Chinese coercion and hostage diplomacy to alleged assassinations orchestrated by India on Canadian soil, ongoing battles with big tech, and fights over trade and security during Donald Trump's first administration, Canada is no longer insulated from the challenges of a G-Zero world.     

In 2024, Canada will be starkly exposed to Eurasia Group's Top Risk #1: The United States vs. itself. With President Joe Biden likely to face off in a rematch against Trump, the US presidential election is set to worsen the country's already deep political divisions and further undermine its credibility on the global stage. As Canada's most important trade and security partner turns inward against itself, Ottawa will spend much of the year clutching its fire extinguisher and eyeing distant emergency exits.

Other top risks this year reflect geopolitical instability stemming from the ongoing wars in Ukraine and the Middle East, growing threats from an axis of rogue states and the rapid proliferation of ungoverned AI, and increasing pressure on governments worldwide to navigate challenges ranging from slowing global growth and higher-for-longer interest rates to a fight for critical minerals and the environmental and humanitarian consequences of an El Nino amplified by climate change.

Here are some of the key takeaways from Eurasia Group's Top Risks 2024 report for Canada. For the full list of top ten global risks, please see the report here.     
  • In 2024, the US will enter its most divisive and dangerous election campaign since the Civil War. With historically low public trust in US institutions, a sharply polarized electorate, and the prospect of algorithmically amplified disinformation, the likely rematch between Biden and Trump—two uniquely unfit candidates for office—will put the US political system on trial.   
  • The US political climate will shift in ways deeply unfavourable to Canada long before a single vote is cast on 5 November. From the moment Trump secures the GOP nomination (not guaranteed, but overwhelmingly likely), Republican elected officials and media outlets will quickly fall in line. Canada's deep economic and physical integration with the world's leading economy will suddenly become a vulnerability as Trump turns his attention to protectionist tariffs, immigration controls, and border security with the United States-Mexico-Canada Agreement (USMCA) up for review in 2026.
  • The Biden administration, meanwhile, will be increasingly preoccupied with the campaign, and Washington's position in the world will weaken as US allies and adversaries alike hedge against the return of Trump. Ottawa should not expect any favours from the White House as Biden comes under withering attack from the Trump campaign over the next ten months.
  • No matter who wins, Canada will grapple with a more divided and unstable US partner in the election's aftermath. If Trump is elected, unrest in major US cities is likely, with violence a real (and nearly inevitable) risk, while the US export of anti-democratic sentiment will probably spill over into Canadian populism. A second Trump administration would take measures to consolidate executive power, weaken checks and balances, and undermine the rule of law—doing lasting damage to US democracy. Even if Biden wins, a large section of the US electorate will reject the outcome, fundamentally weakening the republic, especially with Trump facing the prospect of criminal conviction and prison time. 
  • As the US continues to fragment along red versus blue lines, however, Canada retains some important points of leverage. First, there is the sheer size and significance of the Canada-US trading relationship—worth nearly $1 trillion annually—to the US economy. Second, Canada can effectively lobby state governors, as well as senators and representatives in Washington, to pressure the White House. And third, there are relatively seamless cross-border relationships at the working level that serve to smooth bilateral relations. Ottawa will need these advantages and more to successfully navigate the year ahead in US politics.
  • Middle East on the brink is Eurasia Group's Top Risk #2 this year, and while Canada is not directly involved in the Israel-Hamas conflict, it is already feeling the consequences: first, in its foreign policy tightrope act between expressing support for Israel and humanitarian concerns for Gaza; second, in mounting cases of domestic anti-Semitism and anti-Muslim discrimination. If the conflict escalates in 2024, Ottawa will face growing risks from domestic extremism as it tries to withstand the strategic and economic fallout from a major regional war.
  • Canada is, on the other hand, enmeshed in the Ukraine war through its membership of NATO, assistance to Kyiv, sanctions against Moscow, and its large Ukrainian population. That will make it even harder for Ottawa to accept that Ukraine will be de facto partitioned in 2024 as US military assistance dries up, Kyiv shifts from offence to defence, and Russia's war effort grinds on. Canada is likely to maintain support for Ukraine, but it will find that transatlantic unity over the war is a thing of the past, and the odds of expelling Russia from Ukrainian territory are falling by the day. Cuts to Ottawa's already modest defence budget, moreover, will limit its ability to provide funding for Ukraine and further weaken its influence within the Atlantic alliance.  
  • 2024 will be the year that the consequences of ungoverned AI become obvious amid faltering international regulatory efforts, unconstrained technology companies, and AI models that spread beyond the control of governments. While Canada—thanks to its domestic technology ecosystem—is well-positioned to benefit from AI's economic opportunities, its national regulatory efforts will be too insignificant to move the needle globally. And it will struggle along with the rest of the world to manage the twin risks of rapid proliferation of AI models and a surge in AI-generated disinformation that will further polarize populations, empower rogue actors, and exacerbate global geopolitical risk.    
  • An axis of rogue states comprising Russia, Iran, and North Korea is likely to deepen cooperation this year as these countries seek to evade Western sanctions, undermine existing international institutions, and disrupt a global order that they believe serves Western interests. Ottawa should be prepared for asymmetric attacks and geopolitical instability as Moscow, Tehran, and Pyongyang act in increasingly coordinated and disruptive ways on the global stage. 
  • With its immense endowment of natural resources, long history of mining expertise, robust rule of law culture, and relative cross-party and federal-provincial alignment, Canada is poised to exploit its position as the global fight for critical minerals heats up in 2024. Despite some notable vulnerabilities—for instance, acute dependence on the US market, limited fiscal space for industrial policy, long timelines for infrastructure approval and construction of remote mining sites, and security risks around Chinese investment—Canada's federal and provincial governments, firms, and workers will be among the winners in a sector where geopolitics and national security will increasingly shape the markets that drive global growth and innovation.    
  • Despite expectations of a substantial easing in monetary policy, persistently above-target inflation will lead central banks to keep interest rates high in 2024, resulting in slower economic growth, tighter financial conditions, and no room for policy errors. Developed countries with high debt levels, such as Canada, will face fiscal and financial strain as rising debt servicing costs crowd out spending on public goods and heap pressure on households, with incumbent governments shouldering the blame.