Opportunities to Diversify Canada’s Trade
Opportunities to Diversify Canada’s Trade
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Increasing geographical trade with non-U.S. markets in China and India could significantly decrease Canada’s reliance on the U.S.
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By: Jock Finlayson and Steven Globerman
Opportunities to Diversify Canada’s Trade
- In response to the Trump Administration’s imposition of tariffs on some Canadian exports, together with uncertainty about the future of the Canada-US-Mexico trade agreement, the Carney government has initiated a strategy to diversify Canada’s international trade and reduce dependence upon the United States as a market.
- A specific goal is to double Canada’s exports to non-US importers by 2035.
- The Gravity Model of trade highlights the challenges Canadian exporters face in reducing their dependence on the US market given the large size of the US economy, its physical proximity to Canada, the similarity in laws, regulations, and business practices, and existing tightly integrated bilateral supply chains.
- China and India are particularly promising markets for increased Canadian exports. China’s economy is second in size only to that of the United States, and China and India together are expected to account for about 45% of global economic growth from 2026 to 2030.
- Both China and India are significant importers of energy and other natural resources for which Canada enjoys a comparative advantage.
- A credible, sustained strategy to diversify Canada’s trade will have several reinforcing elements. The first is to pursue bilateral and multilateral trade agreements that improve access to foreign markets for Canadian goods and services.
- The second is to strengthen the country’s capacity to export goods and services to offshore markets by expanding and improving its transportation supply chains and other physical infrastructure that connect Canadian producers to international buyers and customers.
<p><strong><em>Opportunities to Diversify Canada’s Trade</em></strong> highlights the challenges Canadian exporters face in reducing dependence on U.S. importers. China and India demonstrate promise as alternatives since China’s economy is second only to the U.S. in size, while both China and India are expected to account for roughly 45 per cent of global economic growth from 2026-2030.</p>
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