While the Liberals were shut out of two key prairie provinces, they took two-thirds of the seats in Ontario.
The Conservatives won 121 seats but beat the Liberals in the popular vote, taking 34.4 per cent to their 33.1 per cent.
These elections have seen the rise of Bloc Quebecois which favours independence of Quebec from Canada.
Scheer said Canadians have passed judgment on Justin Trudeau, especially in Alberta and Saskatchewan where the Liberals were shut out.
NDP Leader Jagmeet Singh has not dismissed the possibility of working with the Liberals, but has ruled out any deal with the Conservatives.
Having failed to win a majority, Trudeau will have to rely on support from smaller parties such as the Green Party and the New Democratic Party (NDP), led by Jagmeet Singh - the first nonwhite leader of a federal party in Canada.
The president yesterday said he hoped that the $948.4 million trade a year ago between the two countries would double.
Trudeau's Liberals took 157 seats in the 338-member House of Commons, down from a comfortable majority of 184 in the last ballot (and from 177 at the dissolution of parliament), official results showed.
Scheer said on Tuesday in Regina, Saskatchewan, that he would continue to lead the party.
But the son of the late Liberal Prime Minister Pierre Trudeau also had to overcome a sense of fatigue with his government.
"We have put him on notice, his leadership is damaged and his government will end soon and when that time comes, the Conservatives will be ready and we will win!"
Scheer has already said he will not step down, adding he increased his party's seat count and won the popular vote.
But if the projection proves to be correct, it will be a bitterly disappointing result for Conservative leader Andrew Scheer. Liberal politicians and voters can, however, take some consolation in the fact that the New Democratic Party (NDP), which is even farther left than the liberals, will nearly certainly support them, even if it is unlikely to formally join a coalition government.
If he does form a minority government it'll mean compromises, since his Liberals will need the support of other parties if he wants to hold onto power. The elder Trudeau won by the slimmest of margins - just two seats - while his son fell only about a baker's dozen seats short of an actual majority on Monday night. "I'm going to be reflective on how we move forward in the right way".
The election was a disappointment for Conservative leader Andrew Scheer, who had promised to balance the federal budget and eliminate a "carbon tax" on fossil fuels.