Bill Morneau said he was leaving politics and has put his name forward as a candidate to lead the Organisation for Economic Cooperation and Development (OECD).
Mr Trudeau thanked Mr Morneau for his five years as finance minister and said in a statement that “Canada will vigorously support his bid to lead” the OECD.
Mr Morneau and Mr Trudeau have reportedly butted heads amid spending to backstop the pandemic-hammered economy. Mr Morneau said he was not asked to resign but added he was no longer the appropriate the person for the job.
Canada’s government is predicting a historic 343 billion Canadian dollar (£198 billion) deficit for 2020-21, resulting from its economic stimulus plans to battle the impact of Covid-19.
Mr Trudeau has called the spending a lifeline to Canadians battling to stay afloat.
Recent news that Mark Carney, a former governor of the Bank of Canada and the Bank of England, was advising Mr Trudeau during the pandemic fuelled speculation Mr Morneau might be replaced.
Mr Carney and Deputy Prime Minister Chrystia Freeland would be considered favourites to replace Mr Morneau but a senior government official told The Associated Press that Mr Carney was not a potential candidate to replace him.
Opposition parties have been calling for Mr Morneau’s resignation over allegations that he had a conflict of interest in a controversy with WE Charity, a scandal that has also touched Mr Trudeau.
Mr Trudeau has said he should have recused himself from a Cabinet decision to award a contract to WE Charity to administer money to students having trouble finding work due to the pandemic.
The almost billion-dollar program came under scrutiny after it was revealed that WE Charity, an organisation Mr Trudeau’s family has worked for, was chosen to administer it.
Mr Trudeau’s wife, brother and mother have been paid a combined 300,000 Canadian dollars (£168,000) for speaking at a number of WE events.