All Upper Canadians between 18 and 60 years of age were members of the Sedentary Militia, which was called into active duty during the Rebellions of 1837. Macdonald served in the militia, patrolling the area around Kingston, but the town saw no action and Macdonald was not called upon to fire on the enemy. Although most of the trials resulting from the Upper Canada Rebellion took place in Toronto, Macdonald represented one of the defendants in the one trial to take place in Kingston. All the Kingston defendants were acquitted, and a local paper described Macdonald as "one of the youngest barristers in the Province [who] is rapidly rising in his profession".

Macdonald continued to expand his practice, becoming both a director of and a lawyer for the new Commercial Bank of the Midland District. Macdonald was often ill during this time, though the nature of his illness is uncertain. In 1841, Hugh Macdonald died. To fully recover from these problems, Macdonald decided to take a lengthy holiday in Britain in early 1842. He left for the journey well supplied with money, as he spent the last three days before his departure gambling at loo and won substantially. Sometime during his two months in Britain, he met his first cousin, Isabella Clark. As Macdonald does not mention her in his letters home, the circumstances of their meeting are not known. In late 1842, Isabella journeyed to Kingston to visit with a sister. The visit stretched for nearly a year before John and Isabella Macdonald married on 1 September 1843.

In February 1843, Macdonald announced his candidacy for the post of alderman in Kingston's Fourth Ward. On 29 March 1843, Macdonald celebrated his first election victory, with 156 votes against 43 for his opponent, a Colonel Jackson. He also suffered what he termed his first downfall, as his supporters, carrying the victorious candidate, accidentally dropped him onto a slushy street.

In March 1844, Macdonald was asked by local businessmen to stand as Conservative candidate for Kingston in the upcoming legislative election. Macdonald followed the contemporary custom of supplying the voters with large quantities of alcohol. In the era preceding the secret ballot when votes were publicly declared, Macdonald defeated his opponent, Anthony Manahan, by 275 "shouts" to 42 when the two - day election concluded on 15 October 1844. At that time, the Legislative Assembly met in Montreal. Macdonald was never an orator, and especially disliked the bombastic addresses of the time. Instead, he found a niche in becoming an expert on election law and parliamentary procedure.

In 1844, Isabella fell ill. She recovered, but the illness recurred the following year, and she became an invalid. John Macdonald took his wife to Savannah, Georgia, in the United States in 1845, hoping that the sea air and warmth would cure her ailments. Although John Macdonald was able to return to Canada after six months, Isabella remained in the United States for three years. He visited her again in New York at the end of 1846, and returned several months later when she informed him she was pregnant. In August 1847 their son, John Alexander Macdonald Jr. was born, but as Isabella remained ill, relatives cared for the infant.

Even with his absences due to his wife's illness, Macdonald was able to gain professional and political advancement. In 1846, he was created a Queen's Counsel. The same year, he was offered the non-cabinet post of Solicitor General, but declined it. In 1847, the Joint Premier, William Henry Draper, appointed Macdonald as Receiver General. Accepting the government post required Macdonald to give up his law firm income and spend most of his time in Montreal, away from Isabella. When elections were held in December 1847 and January 1848, Macdonald was easily reelected for Kingston, but the Conservatives lost seats and were forced to resign when the legislature reconvened in March 1848. Macdonald returned to Kingston when the legislature was not sitting, and Isabella joined him there in June. In August, the child John Jr. died suddenly. In March 1850 Isabella Macdonald gave birth to another boy, Hugh John Macdonald, and his father wrote, "We have got Johnny back again, almost his image." Even with a new son, the stresses of the marriage caused John Macdonald to drink heavily, both in public and in private.

The Liberals, or Grits, maintained power in the 1851 election, but in 1854, they were divided by a parliamentary scandal. In September, the government resigned, and a coalition government uniting parties from both part of the province under Sir Allan McNab took power. Macdonald did much of the work of putting the government together and served as Attorney General. The coalition which came to power in 1854 became known as the Liberal - Conservatives (referred to, for short, as the Conservatives). In 1855, George - Étienne Cartier of Canada East (today Quebec) joined the Cabinet. Until Cartier's 1873 death, he would be Macdonald's political partner. In 1856, McNab was eased out as premier by Macdonald, who became the leader of the Canada West Conservatives. Though the most powerful man in the government he remained as Attorney General, with Sir Étienne - Paschal Taché as premier.

In July 1857, Macdonald departed for Britain to promote Canadian government projects. On his return to Canada, he was appointed premier in place of the retiring Taché, just in time to lead the Conservatives in a general election. Macdonald was elected in Kingston by 1,189 votes to 9 for John Shaw, who was subsequently hung in effigy; however, other Conservatives did badly in Canada West, and only French - Canadian support kept Macdonald in power. On 28 December, Isabella Macdonald died, leaving John A. Macdonald a widower with a seven year old son. Hugh John Macdonald would be principally raised by his paternal aunt and her husband.

In 1856, the Assembly had voted to move the seat of government permanently to Quebec City. Macdonald had opposed that, and used his power to force the Assembly to reconsider in 1857. Macdonald proposed that Queen Victoria decide which city should be Canada's capital. Opponents, especially from Canada East, argued that the Queen would not make the decision in isolation; she would be bound to receive informal advice from her Canadian ministers. Nevertheless, Macdonald's scheme was adopted, with Canada East support assured by allowing Quebec City to serve a three year term as the seat of government before whichever city was selected as permanent capital. Macdonald privately asked the Colonial Office to ensure that the Queen would not respond for at least ten months, or until after the general election. In February 1858, the Queen's choice was announced — the isolated town of Ottawa, much to the dismay of many legislators from both parts of the province.

On 28 July 1858, an opposition Canada East member proposed an address to the Queen informing her that Ottawa was an unsuitable place for a national capital. Macdonald's Canada East party members crossed the floor to vote for the address, and the government was defeated. Macdonald resigned, and the Governor General, Sir Edmund Walker Head, invited opposition leader George Brown to form a government. Under the law at that time, Brown and his ministers lost their seats in the Assembly by accepting office, and had to face by-elections. This gave Macdonald a majority pending the by-elections, and he promptly defeated the government. Head refused Brown's request for a dissolution of the Assembly, and Brown and his ministers resigned. Head then asked Macdonald to form a government. The law allowed anyone who had held a ministerial position within the last thirty days to accept a new position without needing to face a by-election; Macdonald and his ministers accepted new positions, then completed what was dubbed the "Double Shuffle" by returning to their old posts. In an effort to give the appearance of fairness, Head insisted that Cartier be titular premier, with Macdonald as his deputy.

In the late 1850s and early 1860s, Canada enjoyed a period of great prosperity. Communications improved, due to the railroad and telegraph. According to Macdonald biographer Richard Gwyn, "In short, Canadians began to become a single community." At the same time, the provincial government became increasingly difficult to manage. An act affecting both Canada East and Canada West required a "double majority" — a majority of legislators from each of the two sections of the province. This led to increasing deadlock in the Assembly. The two sections each elected 65 legislators, even though Canada West had a larger population. One of Brown's major demands was "rep by pop", that is, representation by population, which would lead to Canada West having more seats, and was bitterly opposed by Canada East.

The American Civil War led to fears in Canada and in Britain that once the Americans had concluded their internecine warfare, they would invade Canada again. Britain asked the Canadians to pay a part of the expense of defence, and a Militia Bill was introduced in the Assembly in 1862. The opposition objected to the expense, and Canada East representatives feared that French - Canadians would have to fight in a British instigated war. At the time, Macdonald was drinking heavily, and he failed to provide much leadership on behalf of the bill. The government fell over the bill, and the Grits took over under the leadership of John Sandfield Macdonald (no relation to John A. Macdonald). John A. Macdonald did not remain out of power long; the parties remained closely matched, with a handful of independents able to destroy any government. The new government fell in May 1863, but Head allowed a new election, which made little change to party strength. In December 1863, Canada West MP Albert Norton Richards accepted the post of Solicitor General, and so had to face a by-election. John A. Macdonald campaigned against Richards personally, and Richards was defeated by a Conservative. The switch in seats cost the Grits their majority, and they resigned in March. John A. Macdonald returned to office with Taché as titular premier. The Taché - Macdonald government was defeated in June. The parties were deadlocked to such an extent that, according to Swainson, "[i]t was clear to everybody that the constitution of the Province of Canada was dead".

With his government having again fallen, Macdonald approached the new Governor General, Lord Monck, and obtained a dissolution. Before Macdonald could act on that to dissolve the legislature, he was approached, through intermediaries, by Brown, who felt that the crisis gave the parties the opportunity to join together for constitutional reform. Brown had led a parliamentary committee on confederation among the British North American colonies, which had reported back just before the Taché - Macdonald government fell. Brown was more interested in representation by population; Macdonald in a federation that the other colonies could join. The two compromised and agreed that the new government would support the "federative principle" – a conveniently elastic phrase. The discussions were not public knowledge, and Macdonald stunned the Assembly by announcing that the dissolution was being postponed because of progress in negotiations with Brown — the two men were not only political rivals, but were known to hate each other.

The parties resolved their differences, joining in the Great Coalition, with only the Parti Rouge of Canada East, led by Jean - Baptiste - Éric Dorion, remaining apart. A conference, called by the Colonial Office, was scheduled for 1 September 1864 in Charlottetown, Prince Edward Island; the Maritime colonies were to consider a union. The Canadians obtained permission to send a delegation to what became known as the Charlottetown Conference. Macdonald, Cartier, and Brown led the Canadians in Charlottetown. At the conclusion of the conference, the Maritime delegations expressed a willingness to join a confederation if the details could be worked out.

In October 1864 delegates for confederation met in Quebec City for the Quebec Conference, where the Seventy-Two Resolutions were agreed — they would form the basis for the structure of Canada's government. The Great Coalition was endangered by Taché's 1865 death: Lord Monck asked Macdonald to become premier, but Brown felt that he had as good a claim on the position as his coalition partner. The disagreement was resolved by appointing another nonentity to serve as titular premier, Narcisse - Fortunat Belleau.

In 1865, after lengthy debates, Canada's Legislative Assembly approved Confederation by 91 votes to 33. However, none of the Maritimes had approved the plan. In 1866, Macdonald and his colleagues financed pro-Confederation candidates in the New Brunswick general election, resulting in a pro-Confederation assembly. Shortly after the election, Nova Scotia's premier, Charles Tupper, pushed a pro-Confederation resolution through that colony's legislature. A final conference, to be held in London, was needed before the British Parliament could formalise Confederation. Maritime delegates left for London in July 1866, but Macdonald, who was undergoing one of his spells of heavy drinking, did not leave until November, to the fury of the Maritimers. In December 1866, Macdonald not only led the London Conference, winning great acclaim for his handling of the discussions, but wooed and won his second wife, Agnes Bernard. In January 1867, while still in London, he was seriously burned in his hotel room when his candle set fire to the chair he had fallen asleep in, but Macdonald refused to miss any sessions of the conference. In February, he married Agnes at St. George's, Hanover Square. On 8 March, the British North America Act, which would serve Canada as a constitution for over a century, passed the House of Commons (it had previously passed the House of Lords). Queen Victoria gave the bill Royal Assent on 29 March 1867.

Macdonald had favoured the union coming into force on 15 July, fearing that the preparations would not be completed any earlier. The British favoured an earlier date, and on 22 May, it was announced that the Dominion of Canada would come into existence on 1 July. Lord Monck appointed Macdonald as the new nation's first Prime Minister. With the birth of the Dominion, Canada East and Canada West became separate provinces, known as Quebec and Ontario. Macdonald was knighted on that first observance of what came to be known as Canada Day, 1 July 1867.

Macdonald and his government faced immediate problems upon Confederation. Much work remained to do in creating a federal government. Nova Scotia was already threatening to withdraw from Confederation, the Intercolonial Railway, which would both conciliate the Maritimes and bind them closer to the rest of Canada, was not yet built. Anglo - American relations were in a poor state, and Canada had no foreign relations, which were matters handled from London. The withdrawal of the Americans, in 1866, from the Reciprocity Treaty, had increased tariffs on Canadian goods in US markets. Much of present day Canada remained outside Confederation — in addition to the separate colonies of Prince Edward Island, Newfoundland, and British Columbia, which remained governed by the British, vast areas in the north and west belonged to the British and to the Hudson's Bay Company.

The Great Coalition had ended with Confederation. In August 1867, the new nation's first general election was held; Macdonald's party won easily, with strong support in both large provinces, and a majority from New Brunswick. Parliament convened in November, surprisingly without Brown, who was defeated in Ontario and never served as a member of the House of Commons of Canada. By 1869, Nova Scotia had been reconciled to Confederation by the promise of better financial terms — the first of many provinces to negotiate improvements from Ottawa. Pressure from London and Ottawa failed to gain the accession of Newfoundland, whose voters rejected a Confederation platform in a general election in October 1869.

In 1869, John and Agnes Macdonald had a daughter, Mary. It soon became apparent that Mary had ongoing developmental issues. She was never able to walk, nor did she ever fully develop mentally, eventually dying in 1933. John Macdonald himself fell ill in 1870 with a gallstone which took him two months to pass. He convalesced in Prince Edward Island, most likely conducting discussions aimed at drawing the island into Confederation at a time when there was support for it joining the United States. The island entered Confederation in 1873.

Macdonald had once been tepid on the question of westward expansion of the Canadian provinces; as Prime Minister he became a strong supporter of a bicoastal Canada. Immediately upon Confederation, he sent commissioners to London who in due course successfully negotiated the transfer of Rupert's Land and the North - Western Territory to Canada. The Hudson's Bay Company received $1,500,000, and retained some trading posts as well as one-twentieth of the best farmland. Prior to the acquisition becoming effective, the Canadian government faced unrest in the Red River Colony (today southeastern Manitoba, centred on Winnipeg). The local people, including the Métis, were fearful that a rule would be imposed on them which did not take into account their interests, and rose in the Red River Rebellion led by Louis Riel. Unwilling to pay for a territory in insurrection, Macdonald had troops put down the uprising before the 15 July 1870 formal transfer, but as a result of the unrest, the Red River Colony entered Confederation as the province of Manitoba, while the rest of the purchased lands became the North - West Territories.

Macdonald also wished to secure the Colony of British Columbia. There was interest in the United States in bringing about the colony's annexation, and Macdonald wished to ensure the new nation had a Pacific outlet. The colony had an extremely large debt that would have to be assumed should it enter Confederation. Negotiations were conducted in 1870, principally during Macdonald's illness and recuperation, with Cartier leading the Canadian delegation. Cartier promised British Columbia that should it enter Confederation, Canada would build a railroad linking it to the eastern provinces within ten years. Delighted at the extremely expensive promise, British Columbia quickly agreed and entered Confederation in 1871. The Canadian Parliament also ratified the terms: Macdonald cabinet member Alexander Morris described the debate over the generous terms as the worst fight the Conservatives had had since Confederation.

There were continuing disputes with the Americans over deep sea fishing rights, and in early 1871, an Anglo - American commission was appointed to settle outstanding matters between the British (and Canadians) and the Americans. Canada was hoping to secure compensation for damage done by Fenians raiding Canada from bases in the United States. Macdonald was appointed a British commissioner, a post he was reluctant to accept as he realised Canadian interests might be sacrificed for the mother country. This proved to be the case; Canada received no compensation and no significant trade advantages in the settlement, which required Canada to open her waters to American fishermen. Macdonald returned home to defend the Treaty of Washington against a political firestorm.

In the run-up to the 1872 election, Macdonald had yet to formulate a railway policy, or to devise the loan guarantees that would be needed to secure the construction. During the previous year, Macdonald met with potential railway financiers such as Hugh Allan and considerable financial discussion took place. Nevertheless, the greatest political problem Macdonald faced was the Washington treaty, which had not yet been debated in Parliament.

In early 1872, Macdonald submitted the treaty for ratification, and it passed the Commons with a majority of 66. The general election was held through late August and early September (all future Canadian elections would be conducted, for the most part, on one day). Redistribution had given Ontario increased representation in the House; Macdonald spent much time campaigning in the province, for the most part outside Kingston. Widespread bribery of voters took place throughout Canada, a practice especially effective in the era when votes were publicly declared; in future elections the secret ballot would be used. Macdonald and the Conservatives saw their majority reduced from 35 to 8. The Liberals (as the Grits were coming to be known) did better than the Conservatives in Ontario, forcing the government to rely on the votes of Western and Maritime MPs who did not fully support the party.

Macdonald had hoped to award the charter for the railway in early 1872, but negotiations dragged on between the government and the financiers. The charter was finally awarded in late 1872. In 1873, when Parliament opened, Liberal MP Lucius Seth Huntington charged that government ministers had been bribed with large, undisclosed political contributions to award the charter. Documents soon came to light which substantiated what came to be known as the Pacific Scandal. The Allan led financiers had donated $179,000 to the Tory election funds, they had received the charter, and documents established a connection between the two events. Much of the money went to Cartier, who waged an expensive fight to try to retain his seat in Montreal East (he was defeated, but was subsequently returned for the Manitoba seat of Provencher). During the campaign Cartier had fallen ill with Bright's Disease, which may have been causing his judgment to lapse; he died in May 1873 while seeking treatment in London.

Even before Cartier's death, Macdonald attempted to use delay to extricate the government. The delays caused the Opposition to leak documents to friendly newspapers. On 18 July, three papers published a telegram from Macdonald dated August 1872, requesting another $10,000 and promising "it will be the last time of asking". Macdonald was able to get a prorogation of Parliament in August by appointing a Royal Commission to look into the matter, but when Parliament reconvened in late October, the Liberals, feeling Macdonald could be defeated over the issue, applied immense pressure to wavering members.

On 3 November, Macdonald rose in the Commons to defend the government, and according to Macdonald biographer P.B. Waite, gave "the speech of his life, and, in a sense, for his life". He began his speech at 9 p.m., looking frail and ill, an appearance which quickly improved. As he spoke, he consumed glass after glass of gin and water. He denied that there had been a corrupt bargain, and stated that such contributions were common to both political parties. After five hours, Macdonald concluded,

I leave it with this House with every confidence. I am equal to either fortune. I can see past the decision of this House either for or against me, but whether it be against me or for me, I know, and it is no vain boast to say so, for even my enemies will admit that I am no boaster, that there does not exist in Canada a man who has given more of his time, more of his heart, more of his wealth, or more of his intellect and power, as it may be, for the good of this Dominion of Canada.

Macdonald's speech was seen as a personal triumph, but it did little to salvage the fortunes of his government. With eroding support both in the Commons and among the public, Macdonald went to the Governor General, Lord Dufferin on 5 November and resigned; Liberal leader Alexander Mackenzie became the second Prime Minister of Canada. Following the resignation, Macdonald returned home and told his wife Agnes, "Well, that's got along with", and when asked what he meant, told Agnes Macdonald of his resignation, and stated, "It's a relief to be out of it."

On 6 November 1873, Macdonald offered his resignation as party leader to his caucus; it was refused. Mackenzie called an election for January 1874; the Conservatives were reduced to 70 seats out of the 206 in the Commons, giving Mackenzie a massive majority. Macdonald was returned in Kingston but was unseated on an election contest when bribery was proven; he won the ensuing by-election by 17 votes.

Macdonald was content to lead the Conservatives in a relaxed manner in opposition and await Liberal mistakes. He took long holidays and resumed his law practice, moving his family to Toronto and going into partnership with his son Hugh John. One mistake that Macdonald believed the Liberals had made was a free trade agreement with Washington, negotiated in 1874; Macdonald had come to believe that protection was necessary to build Canadian industry. The Panic of 1873 had led to a worldwide depression; the Liberals found it difficult to finance the railroad in such a climate, and were generally opposed to the line anyway — the slow pace of construction led to British Columbia claims that the agreement under which it had entered Confederation was in jeopardy of being broken.

By 1876, Macdonald and the Conservatives had adopted protection as party policy — part of the so-called National Policy, which was widely promoted in speeches at a number of political picnics, held across Ontario during the summer of 1876. Macdonald's proposals struck a chord with the public, and the Conservatives began to win a string of by-elections. By the end of 1876, the Tories had picked up 14 seats as a result of by-elections, reducing Mackenzie's Liberal majority from 70 to 42. Despite the success, Macdonald considered retirement, wishing only to reverse the voters' verdict of 1874 — he considered Charles Tupper his heir apparent.

When Parliament convened in 1877, the Conservatives were confident and the Liberals defensive. After the Tories had a successful session in the early part of the year, another series of picnics commenced in a wide belt around Toronto. Macdonald even campaigned in Quebec, which he had rarely done, leaving speechmaking there to Cartier. Another series of picnics followed in 1878, promoting the National Policy: high tariffs, rapid construction of the transcontinental railway (the Canadian Pacific Railway or CPR), rapid agricultural development of the West using the railroad, and policies which would attract immigrants to Canada. These picnics allowed Macdonald venues to show off his talents at campaigning, and were often lighthearted — at one, the Conservative leader blamed agricultural pests on the Grits, and promised the insects would go away if the Conservatives were elected.

The final days of the 3rd Parliament of Canada were marked by explosive conflict, as Macdonald and Tupper alleged that MP and railway financier Donald Smith had been allowed to build the Pembina branch of the CPR (connecting to American lines) as a reward for betraying the Conservatives during the Pacific Scandal. The altercation continued even after the Commons had been summoned to the Senate to hear the dissolution read, as Macdonald spoke the final words recorded in the 3rd Parliament: "That fellow Smith is the biggest liar I ever saw!"

The election was called for 17 September 1878. Fearful that Macdonald would be defeated in Kingston, his supporters tried to get him to run in the safe Conservative riding of Cardwell; having represented Kingston for 35 years, he stood again in his hometown. In the election, Macdonald was personally defeated in Kingston by Alexander Gunn, but the Conservatives swept to victory. Macdonald remained in the House of Commons, having quickly secured his election for Marquette, Manitoba; elections there were held later than in Ontario. His acceptance of office vacated his parliamentary seat, and Macdonald decided to stand for the British Columbia seat of Victoria, where the election was to be held on 21 October. Macdonald was duly returned for Victoria.

Part of the National Policy was implemented in the budget presented in February 1879. Under that budget, Canada became a high tariff nation like the United States and Germany. Macdonald continued to fight for higher tariffs for the remainder of his life. As the budget moved forward, Macdonald studied the railway issue, and found the picture unexpectedly good. Although little money had been spent on the project under Mackenzie, several hundred miles of track had been built and nearly the entire route surveyed. In 1880, Macdonald found a syndicate, led by George Stephen, willing to undertake the CPR project. Donald Smith (later Lord Strathcona) was a major partner in the syndicate, but because of the ill will between him and the Conservatives, Smith's participation was initially not made public, though it was well known to Macdonald. In 1880, Canada took over Britain's remaining Arctic territories, which extended the Dominion to what are now its present day boundaries, with the exception of Newfoundland, which would not enter Confederation until 1949. Also in 1880, Canada sent its first diplomatic representative abroad, Sir Alexander Galt as High Commissioner to Britain. With good economic times, Macdonald and the Conservatives were returned with a slightly decreased majority in 1882.

The railway project was heavily subsidised by the government. The CPR would receive 25,000,000 acres (100,000 km²; 39,000 sq mi) of land along the route of the railroad, and $25,000,000 from the government. In addition, the government was pledged to build $32,000,000 of other railways to support the CPR. The entire project was extremely costly, especially for a nation with only 4.1 million people in 1881. Between 1880 and 1885, as the railway was slowly built, the CPR repeatedly came close to financial ruin. Not only was the terrain in the Rocky Mountains difficult, the route north of Lake Superior proved trecherous, as tracks and engines sank into the muskeg. When Canadian guarantees of the CPR's bonds failed to make them saleable in a declining economy, Macdonald obtained a loan to the corporation from the Treasury — the bill authorizing it passed the Senate just before the firm would have become insolvent.

As the railway neared completion, the Northwest again saw unrest. Many of the Manitoban Métis had moved into the territories. Negotiations between the Métis and the Government to settle grievances over land rights proved difficult, Riel had lived in exile in the United States since 1870, he journeyed to Regina with the connivance of Macdonald's government, who believed he would prove a leader they could deal with. Instead, the Métis rose the following year under Riel in the North West Rebellion. Macdonald put down the rebellion with militia troops transported by rail, and Riel was captured, tried for treason, convicted, and hung. Macdonald refused to consider reprieving Riel, who was of uncertain mental health. The hanging of Riel proved bitterly controversial, and alienated many Quebecers (like Riel, Catholic and culturally French) from the Conservatives — they would realign with the Liberals by the turn of the 20th century.

The usability of the CPR to transport troops helped it raise money, and the line was completed in late 1885. The following summer, Macdonald himself traveled the line in his first trip west, traveling from town to town by private railway car, and addressing large crowds, until reaching Vancouver. Macdonald traveled with his wife, and to get a better view, the two would sometimes sit on the train's cowcatcher.

In 1886, another dispute arose over fishing rights with the Americans. United States vessels had been using treaty provisions allowing them to land in Canada to take on wood and water as a cover for clandestine inshore fishing. Several vessels were detained in Canadian ports, to the outrage of Americans, who demanded their release. Macdonald sought to pass a Fisheries Act which would override some of the treaty provisions, to the dismay of the British, who were still responsible for external relations. The British government instructed the Governor General, Lord Lansdowne to reserve Royal Assent for the bill, effectively placing it on hold without vetoing it. After considerable discussion, the British government allowed Royal Assent at the end of 1886, and indicated it would send a warship to protect the fisheries if no agreement was reached with the Americans.

Fearing continued loss of political strength as poor economic times continued, Macdonald planned to hold an election by the end of 1886, but had not yet issued the writ when an Ontario provincial election was called by Macdonald's former student, Liberal Ontario Premier Oliver Mowat. The provincial election was seen as a bellwether for the federal poll. Despite considerable campaigning by the Prime Minister, Mowat's Liberals were returned in Ontario, and increased their majority. Macdonald finally dissolved Parliament on 15 January 1887 for an election on 22 February. During the campaign, Macdonald suffered another blow when the Quebec provincial Liberals were able to form a government (four months after the October 1886 Quebec election), forcing the Conservatives from power in Quebec City. Nevertheless, Macdonald and his cabinet campaigned hard in the winter election, with Tupper (the new High Commissioner to London) postponing his departure to try to bolster Conservative hopes in Nova Scotia. The Liberal leader, Edward Blake, ran an uninspiring campaign, and the Conservatives were returned nationally with a majority of 35, winning easily in Ontario, Nova Scotia and Manitoba. The Tories even took a narrow majority of Quebec's seats despite resentment over Riel's hanging. Macdonald became MP for Kingston once again. Even the younger ministers, such as future Prime Minister John Thompson, who sometimes differed with Macdonald on policy, admitted the Prime Minister was an essential electoral asset to the Conservatives.

Blake resigned after the Liberal defeat, to be replaced by Wilfrid Laurier. Under Laurier's early leadership, the Liberals, who had accepted much of the National Policy under Blake while questioning details, rejected it entirely, calling for "unrestricted reciprocity", or free trade, with the United States. Advocates of Laurier's plan argued that north - south trade made more economic sense than trying to trade across the vast, empty prairies, using a CPR which was already provoking resentment for what were seen as high freight rates. Macdonald was willing to see some reciprocity with the United States, but was reluctant to lower many tariffs. American advocates of what they dubbed "commercial union" saw it as a prelude to political union, and did not scruple to say so, causing additional controversy in Canada.

Macdonald called an election for 5 March 1891. The Liberals were heavily financed by American interests; the Conservatives drew much financial support from the CPR. The 76 year old Prime Minister collapsed during the campaign, and conducted political activities from his brother - in - law's house in Kingston. The Conservatives gained slightly in the popular vote, but their majority was trimmed to 27. The parties broke even in the central part of the country but the Conservatives dominated in the Maritimes and Western Canada, leading Liberal MP Richard John Cartwright to claim that Macdonald's majority was dependent on "the shreds and patches of Confederation". After the election, Laurier and his Liberals grudgingly accepted the National Policy, and when Laurier himself later became Prime Minister, he adopted it with only minor changes.

Several weeks of rest after the election seemed to restore Macdonald to health. However, in late May, he suffered a stroke, which left him partially paralysed. Vehicles and vessels passing his Ottawa home, Earnscliffe, did so as quietly as possible, while the nation followed the reports from Macdonald's sickroom. "The Old Chieftain" lingered for days, remaining mentally alert, before dying in the late evening of Saturday, 6 June 1891. Thousands filed by his open casket in the Senate Chamber; his body was transported by funeral train to his hometown of Kingston, with crowds greeting the train at each stop. On arrival in Kingston, Macdonald lay in state again in City Hall, wearing the uniform of an Imperial Privy Counselor. He was buried in Cataraqui Cemetery in Kingston, his grave near that of his first wife, Isabella.

Wilfrid Laurier paid tribute to Macdonald in the House of Commons:

In fact the place of Sir John A. Macdonald in this country was so large and so absorbing that it is almost impossible to conceive that the politics of this country, the fate of this country, will continue without him. His loss overwhelms us.