For decades, Canada and the U.S. have made things together. Our two economies are deeply integrated in agriculture, manufacturing, the financial system (which funds household spending and business investments), energy markets and more.

Take for example, the fact that auto parts can cross North American borders up to eight times before final assembly!

Our impressive commercial relationship has grown over decades because it makes more economic sense to work together than to go it alone. Right now, that relationship is being severely tested by the ongoing trade war sparked by President Trump’s tariffs, compounded by the tariffs from China on Canada’s agri-food productions.

Opportunities for Economic Growth

U.S. tariffs have been a blow to Canada’s economy, particularly our steel, aluminum, agriculture and agri-food, forestry and soft wood lumber, and auto industries, with some companies having already laid off employees.

This trade war has taught Canada a painful lesson: we’ve been patching our economic holes with the convenience of U.S. trade for too long. Economic security and sovereignty starts at home. While there’s no easy or quick fix to these economic challenges, there are opportunities that Canada can pursue now to ensure long-term success and a better life for all.

Trade Diversification

The lesson Canada has taken from this tariff situation is that we’ve been over-reliant on a single market. The U.S. is a convenient trading partner — we share the longest land border with them, and they buy a lot of stuff from us. In 2023, our total exports to the U.S. were valued at almost $600 billion.

If the U.S. stops buying as much from us because of these tariffs, it’s not as simple as Canadian businesses selling their products to other markets. The U.S. is Canada’s biggest export market — by far. Next is China at $30 billion, followed by Japan and the United Kingdom, both within the $15 billion range. That’s a significant difference and a gap that can’t be filled overnight — or even in a few months. Building this kind of relationship with the U.S. took decades. It’s a long-term project.

It just goes to show how critical and reliable a supply chain partner Canada is for the U.S. That doesn’t mean we shouldn’t do it. While it may not fill the gaps now, trade diversification will reap long-term benefits in the future and make our economy far less reliant on a single market.

Read Policy Matters: 3 Priorities for International Trade

Value-Add Manufacturing

Did you know that most (63%) of the goods Canada sells to the U.S. aren’t final products but are intermediate goods? This means that they’re used by producers in the U.S. to make final products for consumers.

This is an area of opportunity for Canada. Instead of shipping out our raw materials and commodities to other countries so they can refine/manufacture them for us — anything from canola, to cattle, to rare earth elements — we would build up our domestic manufacturing infrastructure to turn the raw materials into useful products ourselves, which could be sold at a higher value.

Canada’s manufacturing sector is a cornerstone of our economy, accounting for nearly 10% of Canada’s real GDP, the employment of 1.7 million people and over 68% of all physical goods sold to other countries! Building up our value-add manufacturing sector would grow our economy and provide good jobs to Canadians.

Read Policy Matters: The Importance of Building Rare Earth Elements (REE) Supply Chain Resilience in Canada

Read Policy Matters: Advancing Canada’s Agriculture and Agri-Food Sector

Renegotiating CUSMA

Since the CUSMA came into effect, there has been a 47% increase in North American trade, as well as an additional 4 million new jobs supported by this trade. Businesses across Canada rely on the stable and predictable trading environment CUSMA has created. Unfortunately, with the U.S.-instigated trade war, the deal isn’t providing the same stability anymore. A free trade agreement only has value if the parties involve uphold their commitments in good faith.

On July 1, 2026, Canada, the United States and Mexico will decide whether to extend CUSMA for a new 16-year term. If they choose not to, there will be a review every year until the Agreement terminates in 2036. Unfortunately, the pre-election concern that “Buy American” protectionist policies would conflict with CUSMA’s goal of North American economic cooperation was justified.

The CUSMA review in 2026 should be seen as an opportunity to reaffirm the critical importance of North American economic cooperation. However, the current tariff situation has made it clear that we need to move toward something new, rather than try to revisit what has been.

By eliminating almost all tariffs and keeping most North American trade duty-free, CUSMA makes it a lot easier and more affordable for Canadian businesses to get their products to customers in the United States and Mexico, and for Canadians to purchase their favourite products from stores. This is the reality we want for Canadian business.

Read Policy Matters: Why It’s Time to Care about CUSMA

Canada has everything we need to succeed; now, it’s a matter of combining political will with strategy to take advantage of economic opportunities that will result in a better life for Canadians across the country.

Read Policy Matters: Why It’s Time to Go All-In on Canada’s Economic Sovereignty