Sentiment bound the Canadas, the Maritimes, and British Columbia more closely to England than to each other. There were different standards of currency in use in the several colonies, and trade between them was complicated by customs barriers. Their everyday business brought them into close touch with the United States. When the St. Lawrence ports of Quebec and Montreal were frozen in, news and even passengers traveled on the new United States railways across the eastern states from New York to the Canadian border. The newly invented magnetic telegraph, which was installed in Toronto in 1846, soon connected that city not only with Quebec but also with New York City and New Orleans in the United States.

From 1861 to 1865 people in the British colonies watched with interest and uneasiness the course of the American Civil War (see Civil War, American). From this great conflict they saw arise a freshly united nation, powerfully equipped with what were now surplus tools of war and, in the opinion of many, only too willing to use them against the neighboring colonies of Great Britain. Britain had almost gone to war against the North because the North's blockade of Southern shipping interfered with Britain's cotton trade. The absorption of the British colonies into the United States was again being called for by United States extremists who revived the old cry of "manifest destiny" of their republic.

Lord Elgin had negotiated a ten-year trade treaty with the United States whereby tariffs were reduced on a reciprocal basis on many items. The resulting stimulation of trade was scheduled to cease in 1864, when United States renewal of the treaty was withheld. The desirability of substituting increased intercolonial trade was recognized by everyone in Canada and the Maritimes.

The government of the Canadas under the Act of Union was running into difficulties because Canada West by this time had increased in population faster than Canada East. The act had provided for equal representation of both parts of the colony at a time when French-speaking Canada East was numerically much larger than Canada West. A state of almost continuous deadlock ensued in Parliament, with no government able to secure a clear majority.

Between 1861 and 1864 four separate ministries and two general elections failed to end the impasse. In 1864 a coalition headed by the leader of the Conservatives, John A. Macdonald, and Liberal leader George Brown, who was founder of the Toronto Globe, gave promise of a more stable government (see Macdonald). Macdonald, with his trusted ally Georges-Etienne Cartier from Canada East, then obtained Brown's assurance of cooperation in the best interests of the country, even though Brown had long considered Macdonald and Cartier his deadly political enemies.

The coalition government wanted to work out some form of federal union to include the Maritime Provinces if they were willing. Provincial matters would be left to the individual provinces. Only subjects of concern to all the provinces would be dealt with by the federal government.