PUBLISHED May 28, 2026
The Record That Tells the Real Story: 64.1 Percent
According to “Quarterly Economic and Trade Report: Spring 2026”, published by the Office of the Chief Economist at Global Affairs Canada on 8 April 2026, the United States accounted for 64.1 percent of Canada’s total goods and services exports in Q4 2025 — the lowest quarterly share observed since the beginning of the data series. From Q1 1997 through Q4 2024, Canada’s US export share had never fallen below 64.5 percent (briefly, during the pandemic Q2 2020). The Q4 2025 reading breaks through the floor of an entire generation of trade data.
The trajectory of this share tells the story of 2025’s trade disruption with unusual clarity. In Q1 2025, the US share was still 71.5 percent — essentially normal. In Q2, as tariffs hit and exports fell sharply, it dropped to 65.5 percent. In Q3, a partial recovery brought it back to 67.4 percent. In Q4, it fell again to 64.1 percent. The direction is unambiguous. Whether it represents a durable structural shift or a temporary disruption-driven detour is the central question that the report addresses with analytical honesty.
The Gold Problem: 44 Percent of Diversification Is Not Diversification
The report’s most candid analytical passage concerns the composition of Canada’s non-US export gains. For the full year 2025, exports to non-US markets grew by 11.2 percent. But nearly 44 percent of those gains came from gold — safe-haven metal flows driven by record-high gold prices and global risk aversion, not by Canadian firms finding new commercial customers in new markets.
If gold, silver, and platinum group metals are excluded, Canada’s merchandise exports to non-US destinations rose by only $14.0 billion in 2025, while shipments to the United States contracted by $30.9 billion. In the absence of gold, Canadian exports would have declined 2.1 percent overall. The arithmetic of diversification collapses when the commodity driving it is one whose price is set by global fear rather than Canadian competitiveness.
The Bank of Canada’s Business Outlook Survey for Q4 2025 reinforces this diagnosis: most exporters facing weaker US sales have not expanded into non-US markets. Those already active abroad have increased their focus on those markets — but this represents intensification of existing relationships, not new market creation. The structural work of genuine trade diversification — finding new customers, building new supply chains, certifying for new regulatory environments — has barely begun for most Canadian exporters.
The United Kingdom Spike: $7.6 Billion in One Quarter
The most dramatic single trade flow in Canada’s Q4 2025 data is the $7.6 billion surge in exports to the United Kingdom — a 73.2 percent quarterly increase that propelled the UK to second place among Canada’s export destinations for that quarter. This extraordinary figure is almost entirely explained by gold shipments: London is the world’s primary gold trading hub, and when Canadian gold production is redirected away from US buyers, it flows through London’s bullion market.
The same pattern is visible in the annual data: UK goods exports rose 67.6 percent year-over-year in 2025. Germany received significantly more Canadian exports (+34.6% YTD), France (+14.0%), and China (+14.0%). These are real increases in commercial activity — but as the report notes, the gold concentration means they reflect financial flows and commodity pricing dynamics as much as they reflect deepening industrial trade relationships.
The Switzerland data tells the same story in reverse: after three consecutive quarters of very strong growth driven by Swiss gold imports from Canada, Swiss imports fell 28.9 percent in Q4 as flows normalised. The volatility of gold-driven trade data makes the underlying commercial picture difficult to read and creates false impressions of diversification momentum that may partially reverse when gold market dynamics shift.
One of the more surprising findings in the Spring report concerns Canada’s position in US import rankings. Despite a 7 percent decline in Canadian exports to the United States in 2025, Canada moved up in the rankings to become the United States’ second-largest source of merchandise imports — behind Mexico, but ahead of China, which had held second place since 2015.
China’s dramatic 29.7 percent decline in US merchandise imports — driven by escalating Section 301 tariffs and supply chain diversification by American importers — opened the rankings gap that Canada moved into, even as Canadian exports themselves fell. Taiwan (+73.3%), Switzerland (+67.4%), Thailand (+44.2%), and Vietnam (+42.0%) all saw their US import shares surge as American purchasers shifted away from Chinese suppliers. Canada benefited from its position as a CUSMA/USMCA partner for categories not covered by Section 232 tariffs.
This ranking improvement is real, but its interpretation requires care. Canada is second-largest because China fell further than Canada, not because Canadian exports to the US recovered. The underlying flow — $132.2 billion in goods exports to the US in Q4 alone — remains enormous and the relationship remains deeply integrated. But the ranking shift illustrates how dramatically the US import landscape has been restructured in two years of aggressive tariff policy.
One of the more surprising findings in the Spring report concerns Canada’s position in US import rankings. Despite a 7 percent decline in Canadian exports to the United States in 2025, Canada moved up in the rankings to become the United States’ second-largest source of merchandise imports — behind Mexico, but ahead of China, which had held second place since 2015.
China’s dramatic 29.7 percent decline in US merchandise imports — driven by escalating Section 301 tariffs and supply chain diversification by American importers — opened the rankings gap that Canada moved into, even as Canadian exports themselves fell. Taiwan (+73.3%), Switzerland (+67.4%), Thailand (+44.2%), and Vietnam (+42.0%) all saw their US import shares surge as American purchasers shifted away from Chinese suppliers. Canada benefited from its position as a CUSMA/USMCA partner for categories not covered by Section 232 tariffs.
This ranking improvement is real, but its interpretation requires care. Canada is second-largest because China fell further than Canada, not because Canadian exports to the US recovered. The underlying flow — $132.2 billion in goods exports to the US in Q4 alone — remains enormous and the relationship remains deeply integrated. But the ranking shift illustrates how dramatically the US import landscape has been restructured in two years of aggressive tariff policy.
Canada attracted $93.6 billion in foreign direct investment in 2025 — the highest level of the decade for a second consecutive year, well above the 10-year average of $57.7 billion. Approximately 56 percent ($52.7 billion) came from the United States, driven largely by mergers and acquisitions in Q4 ($17.5 billion). Non-US FDI totalled $40.9 billion for the year, above the 10-year annual average of $28.6 billion.
This FDI record is notable precisely because it occurred during a year of significant Canada-US trade tension. It suggests that American and international investors continue to view Canada as an attractive destination for long-term capital commitment — consistent with the wave of corporate transactions documented in the April economic news digest, including Shell’s $22 billion acquisition of ARC Resources and KingSett’s $9.4 billion acquisition of First Capital REIT.
The contrast with outbound Canadian direct investment is striking. Canadian direct investment abroad totalled $76.2 billion in 2025 — significantly below its 10-year average of $101.4 billion. Flows to the United States totalled only $27.6 billion, the lowest level since 2013 and less than half the 10-year average. Canadian firms are not investing in America at the rate they historically did, and Q1 2025 saw $20.0 billion in divestment from Canadian-owned US operations — a significant withdrawal of Canadian capital from the US market amid the trade conflict.
The Bank of Canada’s January 2026 Monetary Policy Report projected Canadian GDP growth of 1.1 percent in 2026 — the slowest pace since the pandemic year of 2020, if realised. The Global Affairs Canada report synthesises the forces behind this projection with precision.
Net exports will contribute negatively to GDP growth in 2026 (-0.1 percentage points) as exports face headwinds from continued US tariff uncertainty and Canada has not yet completed the structural diversification required to replace the lost US demand with equivalent volumes elsewhere. Inventory accumulation is expected to slow after the stockpiling surge of early 2025, creating a drag on production. Business fixed investment remains weak as firms delay capital commitments pending trade policy clarity.
The positive contributions come from consumption (0.7 percentage points) and government spending (approximately equal to consumption), with infrastructure investment as the primary government channel. Federal programs including the Trade Diversification Corridors Fund and the Strategic Response Fund are expected to provide some support to business investment — but their scale relative to the overall investment gap is modest.
The IMF’s January 2026 forecast places global GDP growth at 3.3 percent for 2026, supported by AI investment and ongoing fiscal and monetary support. Canada’s 1.1 percent is well below that global average and below every comparable advanced economy in the IMF’s table. The US is forecast at 2.4 percent, the EU at 1.5 percent, the UK at 1.3 percent. Canada’s under-performance relative to peers reflects the direct and indirect cost of its trade exposure to a US administration pursuing aggressive tariff policy toward its largest trading partner.
The Spring 2026 report does not prescribe policy, but its data implicitly defines what genuine trade diversification would require — and how far Canada currently is from achieving it.
Real diversification means Canadian manufacturers finding customers in Europe, Asia, and Latin America for products they currently sell primarily to the United States. It means steel and aluminium producers certifying to new standards, logistics companies building new routes, professional services firms establishing new client relationships, and agricultural exporters navigating new regulatory regimes. The Bank of Canada’s Business Outlook Survey finding — that most tariff-affected exporters have not expanded into new markets — identifies precisely the gap between the current state and the required destination.
The gold-driven trade numbers of 2025 provided a useful financial buffer. Non-US export revenues largely offset lost US revenues in aggregate, which is why Canada’s trade position did not deteriorate as catastrophically as early fears suggested. But gold prices and gold flows are not within Canada’s control, and they do not represent the kind of durable, relationship-based trade diversification that would genuinely reduce Canada’s structural dependence on the US market.
The US share of Canadian exports has been above 64 percent in every quarter since records began. Q4 2025 broke below that floor for the first time. Whether that break is the beginning of a permanent structural shift — or a temporary, gold-inflated anomaly — will be determined not by commodity prices but by the commercial decisions of thousands of Canadian exporters who, as of the latest survey data, have mostly not yet made the structural leap.
Canada attracted $93.6 billion in foreign direct investment in 2025 — the highest level of the decade for a second consecutive year, well above the 10-year average of $57.7 billion. Approximately 56 percent ($52.7 billion) came from the United States, driven largely by mergers and acquisitions in Q4 ($17.5 billion). Non-US FDI totalled $40.9 billion for the year, above the 10-year annual average of $28.6 billion.
This FDI record is notable precisely because it occurred during a year of significant Canada-US trade tension. It suggests that American and international investors continue to view Canada as an attractive destination for long-term capital commitment — consistent with the wave of corporate transactions documented in the April economic news digest, including Shell’s $22 billion acquisition of ARC Resources and KingSett’s $9.4 billion acquisition of First Capital REIT.
The contrast with outbound Canadian direct investment is striking. Canadian direct investment abroad totalled $76.2 billion in 2025 — significantly below its 10-year average of $101.4 billion. Flows to the United States totalled only $27.6 billion, the lowest level since 2013 and less than half the 10-year average. Canadian firms are not investing in America at the rate they historically did, and Q1 2025 saw $20.0 billion in divestment from Canadian-owned US operations — a significant withdrawal of Canadian capital from the US market amid the trade conflict.
The Bank of Canada’s January 2026 Monetary Policy Report projected Canadian GDP growth of 1.1 percent in 2026 — the slowest pace since the pandemic year of 2020, if realised. The Global Affairs Canada report synthesises the forces behind this projection with precision.
Net exports will contribute negatively to GDP growth in 2026 (-0.1 percentage points) as exports face headwinds from continued US tariff uncertainty and Canada has not yet completed the structural diversification required to replace the lost US demand with equivalent volumes elsewhere. Inventory accumulation is expected to slow after the stockpiling surge of early 2025, creating a drag on production. Business fixed investment remains weak as firms delay capital commitments pending trade policy clarity.
The positive contributions come from consumption (0.7 percentage points) and government spending (approximately equal to consumption), with infrastructure investment as the primary government channel. Federal programs including the Trade Diversification Corridors Fund and the Strategic Response Fund are expected to provide some support to business investment — but their scale relative to the overall investment gap is modest.
The IMF’s January 2026 forecast places global GDP growth at 3.3 percent for 2026, supported by AI investment and ongoing fiscal and monetary support. Canada’s 1.1 percent is well below that global average and below every comparable advanced economy in the IMF’s table. The US is forecast at 2.4 percent, the EU at 1.5 percent, the UK at 1.3 percent. Canada’s under-performance relative to peers reflects the direct and indirect cost of its trade exposure to a US administration pursuing aggressive tariff policy toward its largest trading partner.
The Spring 2026 report does not prescribe policy, but its data implicitly defines what genuine trade diversification would require — and how far Canada currently is from achieving it.
Real diversification means Canadian manufacturers finding customers in Europe, Asia, and Latin America for products they currently sell primarily to the United States. It means steel and aluminium producers certifying to new standards, logistics companies building new routes, professional services firms establishing new client relationships, and agricultural exporters navigating new regulatory regimes. The Bank of Canada’s Business Outlook Survey finding — that most tariff-affected exporters have not expanded into new markets — identifies precisely the gap between the current state and the required destination.
The gold-driven trade numbers of 2025 provided a useful financial buffer. Non-US export revenues largely offset lost US revenues in aggregate, which is why Canada’s trade position did not deteriorate as catastrophically as early fears suggested. But gold prices and gold flows are not within Canada’s control, and they do not represent the kind of durable, relationship-based trade diversification that would genuinely reduce Canada’s structural dependence on the US market.
The US share of Canadian exports has been above 64 percent in every quarter since records began. Q4 2025 broke below that floor for the first time. Whether that break is the beginning of a permanent structural shift — or a temporary, gold-inflated anomaly — will be determined not by commodity prices but by the commercial decisions of thousands of Canadian exporters who, as of the latest survey data, have mostly not yet made the structural leap.
