Canada Eyes Diversification as US Trade Hits Record Low

Dublin on Saturday, Prime Minister Mark Carney said middle-power countries should not compete for favour with the United States. He made the remark while meeting Micheál Martin at Ireland's Government Buildings, a setting chosen for diplomacy but impossible to separate from arithmetic. Canada still trades overwhelmingly with its southern neighbour, and the numbers have begun to move in ways that make dependence harder to defend.

Exports to the United States accounted for 67.3 per cent of all Canadian exports in October, the lowest non-pandemic level since the current method of calculation was established in 1997. The shift was not the result of booming alternatives. The value of goods sent from Canada to the U.S. fell by 4.1 per cent even as imports increased by 5.3 per cent. The imbalance spread quickly through the accounts. Canada's trade surplus with the U.S. fell to $4.8 billion from $8.4 billion in September, months after President Donald Trump imposed tariffs on a raft of Canadian imports and Carney stressed the need for trade diversification.

Dependence is weakening without becoming optional

That appeal now sits at the centre of Canadian economic strategy because the alternatives are older than the current dispute. Historically, Canada has faced three trade options: relying heavily on the U.S., integrating more deeply through agreements such as CUSMA, or diversifying beyond the American market. The options sound distinct. In practice they are all shaped by the same reality: access to the United States remains the benchmark against which every other choice is measured.

The pressure does not stop at Canada's border. Trade tensions between the United States and China escalated sharply in early 2025. Washington imposed 10 per cent tariff increases on all Chinese goods in February and March before raising rates to a peak of 125 per cent in April. The effect was immediate. Model estimates suggest the tariffs reduced U.S. imports from China by around 9 per cent, while the observed year-on-year decline reached roughly 17 per cent during the first nine months of 2025.

Yet the expected reshuffling of global commerce has proved elusive. The tariffs had a strong negative direct effect on China's exports to the United States, but evidence of broad-based trade diversion remains limited. Researchers caution that empirical analyses of the 2025 tariff episode are still scarce and that existing assessments rely on early evidence. Countries searching for a clean escape from dependence on the American market have not yet found one in the data.

Strategic autonomy remains easier to declare than to achieve

That is what gives Carney's words their edge. He did not argue that middle powers should win Washington's favour more effectively. He argued they should not compete for it at all. The statement sounds like a call for strategic autonomy. The trade figures tell a more uncomfortable story: Canada is trying to diversify precisely because the United States remains too important to ignore, and the global trading system has yet to show that middle powers can reduce that dependence simply by choosing to.