Macdonald sought to strengthen the new Dominion both at home and abroad. He could foresee the ultimate evolution of something akin to the modern British Commonwealth, in which Canada would be an equal partner with the mother country. During the seven years following his return to office, his government adopted its previously announced protective tariff (1879), appointed Canada's first high commissioner to London (1880), annexed the Arctic Archipelago (1880), and completed the overdue transcontinental railway (1885).

In 1885 word of a new crisis was flashed from the Northwest Territories. Louis Riel was leading the metis of the valley of the South Saskatchewan in a new uprising against the federal government, and this time he had aroused numbers of the Indians to fight beside him. A militia force was hastily dispatched under Gen. Frederick Middleton over the completed portion of the Canadian Pacific Railway. Within a few weeks the Northwest Rebellion was put down and Riel was arrested. His trial for treason and his execution aroused wide controversy across Canada and to a considerable extent cost the Conservative party the support of French-speaking Canadians for many decades.

Macdonald's National Policy was by now the chief target of the Liberals, who were calling for "unrestricted reciprocity" in trade with the United States. Macdonald won the 1891 election. His health was failing, however, and later that year he died.

Because of their government majority, the Conservatives were not required to call a new election for five years. During this time, however, they had to select four prime ministers in succession--Sir John J.C. Abbott (1891-92), Sir John S.D. Thompson (1892-94), Sir Mackenzie Bowell (1894-96), and Sir Charles Tupper (1896). Finally the Conservative party foundered, under Tupper's leadership, on the thorny Manitoba School Question. Manitoba had abolished its separate Roman Catholic schools a few years earlier. This was allegedly in violation of provisions in the Manitoba Act and the British North America Act. The provincial government's action was upheld, however, by the Judicial Committee of the Privy Council. (See also Abbott; Thompson, John Sparrow David; Tupper.)

The new Liberal leader, Wilfrid Laurier, a French-speaking Canadian, favored conciliation rather than coercion. The Conservatives were defeated on the issue in the election; and the responsibility of government passed to the Liberals, under Laurier.

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