Beyond the US: Canada’s Push to Diversify Exports to Europe, Asia and the Indo-Pacific

Canada has talked about diversifying its exports since the 1970s; what makes the 2025-2026 push different is that the United States gave it no choice. With roughly three-quarters of exports historically going to one customer, and that customer imposing 50% duties, import bans and an unrenewed trade agreement, Ottawa has treated every other relationship as a hedge. The results are uneven. Trade with Europe under CETA has grown but is under-used; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) now has twelve members and a queue of applicants; the China relationship has been repaired at a price Washington dislikes; and the India relationship has been rebuilt from a diplomatic rupture in under a year. This article assesses each channel and asks what Canadian exporters can realistically expect. It is part of the Canada Company Stories hub.

How dependent is Canada on the United States, and is that changing?

Canada remains more dependent on a single export market than any other G7 country, but the dependence is falling faster than at any time in the statistical record. Global Affairs Canada’s Spring 2026 report shows the US share of Canadian exports dropping to 64.1% in the fourth quarter of 2025, the lowest ever, with exports to the US down 1.9% and exports to non-US markets up 13.4% in the quarter. By July 2026 the US share stood at 66.35%, down from 72.64% a year earlier. The US share of Canadian imports fell to 59% over the twelve months to mid-2026 from 62% in 2024.

The caveat is gold. About 44% of the growth in non-US exports in 2025 came from gold, driven by price and by flows through the Toronto bullion market rather than by any change in industrial capacity. Strip out gold and Canada’s exports fell 2.1% in 2025. The Bank of Canada’s April 2026 analysis added a structural warning: for steel, lumber and autos, high transport costs make redirection to Asia or Europe difficult, and the aluminium producers that did shift sales to Europe did so at lower margins.

The official response has been to set targets rather than acknowledge limits. Ottawa has committed to doubling non-US exports within a decade, redirecting about C$12 billion of food-sector exports, and increasing exports to China by 50% by 2030. The Trade Commissioner Service has 85% of its staff posted outside the United States, and the CanExport SMEs programme allocated C$38.3 million to 1,773 small firms in its most recent reported year. Whether these targets are reachable depends on which channel one examines.

Why has CETA under-delivered, and can it do more?

CETA has removed 98% of tariffs between Canada and the European Union since its provisional application on 21 September 2017, yet fewer than two-thirds of Canadian exporters that could use its preferences actually do. The agreement’s most-cited failure is autos: it was forecast to raise Canadian vehicle exports to the EU from 13,000 to 100,000 units a year, and the actual figure was about 24,000 in 2021. The EU accounted for 8.7% of Canada’s total trade in 2025, making it Canada’s second-largest partner, with Canadian exports of goods and services to the EU at €48.3 billion and imports at €76.3 billion in 2024.

The investment relationship is larger than the trade one. Canadian direct investment stock in the EU was C$297 billion, supporting about 275,000 jobs, and EU investment in Canada was C$194 billion. Trade in goods and services grew 81% between 2016 and 2025, which is respectable but from a low base. Ratification remains incomplete: seventeen member states have ratified, nine are pending (including France, Italy, Poland and Belgium) and Cyprus voted against in 2020, which is why the investment court provisions still do not apply.

What has changed since 2025 is the security dimension. Canada and the EU signed a Security and Defence Partnership at the Brussels summit on 22-23 June 2025, and in February 2026 the Council of the EU authorised Canada’s participation in SAFE, the €150 billion joint defence procurement instrument, making Canada the first non-European participant. That opens EU procurement to Canadian defence manufacturers such as those profiled in our story on CAE and Héroux-Devtek. The 21st Canada-EU summit is scheduled for 29-30 October 2026 in Canada. Public opinion has moved further than policy: 77% of Canadians supported closer EU trade in a February 2026 poll, and 50-57% supported starting a membership process, though Commissioner Marta Kos has said Canada does not meet the “European state” test and Carney has ruled out applying.

What has the CPTPP delivered, and who is joining?

The CPTPP has grown from eleven members to twelve and is becoming the Indo-Pacific trade architecture Canada hoped for when it reluctantly signed in 2018. Canada was one of the six founding ratifiers when the agreement took effect on 30 December 2018, having initially refused to sign at the 2017 APEC meeting over cultural exemptions and auto rules of origin. The United Kingdom’s accession took effect on 15 December 2024, bringing a member with more than C$47 billion in annual trade with Canada into the bloc. The government cites 39% growth in Canada’s CPTPP trade since 2018.

The accession pipeline is long. Costa Rica concluded negotiations on 6 May 2026 and is expected to sign late in 2026; Uruguay was invited to begin talks in November 2025; and at the tenth Commission meeting on 26 June 2026, members agreed to open accession discussions with Indonesia, the Philippines and the United Arab Emirates. Argentina applied on 3 June 2026. China and Taiwan both applied in September 2021 and remain in limbo, with Vietnam expressing support for China’s bid in April 2026. Canada vice-chairs the Costa Rica working group and hosted the eighth Commission in Vancouver in November 2024.

Canada has supplemented the bloc with bilateral deals. The Canada-Indonesia agreement announced on 24 September 2025 is the first Canadian bilateral trade pact with an ASEAN member, eliminating tariffs on over 95% of Canadian exports and backed by C$825 million in Export Development Canada financing. Negotiations have been launched with Thailand and the Philippines. South Korea, with two-way trade of C$24.5 billion in 2024, signed a Security and Defence Cooperation Partnership with Canada in November 2025, the first of its kind for Canada in the region. The constraint is physical: Vancouver and Prince Rupert are Canada’s only Pacific gateways, ranked 389th and 362nd respectively in the World Bank’s port performance index, and marine infrastructure needs C$15-21.5 billion of investment. Our profile of the Port of Vancouver and Prince Rupert looks at that bottleneck.

How did Canada repair relations with China, and what did it cost?

The China reset began with canola. In October 2024 Canada matched US tariffs of 100% on Chinese electric vehicles and 25% on steel and aluminium. China retaliated on 20 March 2025 with 100% tariffs on Canadian canola oil, meal and peas and 25% on pork and seafood, then added a 75.8% anti-dumping duty on canola seed on 14 August 2025. Canadian canola shipments to China, which had hit a record 7.9 million tonnes in 2024, fell 62% in 2025; the Saskatchewan benchmark price dropped almost 9% on the announcement, and a large harvest overwhelmed on-farm storage. Shipments to other markets rose 161% but from a small base, and total export volume still fell 7.4%.

Carney made his first official visit to China in January 2026 and on 16 January the two governments issued a Preliminary Joint Arrangement. China committed to cut the combined canola seed tariff to about 15% by 1 March 2026 (the final rate was 14.9%, from almost 85%), to exempt canola meal, peas, lobster and crab from the extra tariffs until the end of 2026, and to restore access for beef from 20 registered Canadian plants, for porcine and bovine genetics and for pet food. The affected trade is about C$4 billion of canola seed and C$2.6 billion of other agri-food products. Canada in turn created an annual quota of 49,000 Chinese EVs at the 6.1% most-favoured-nation rate, with half reserved for vehicles priced at C$35,000 or less by 2030, extended surtax remissions for Chinese steel and aluminium in short supply through 2026, and dropped planned tariffs on Chinese solar products and semiconductors. The arrangement is to be reviewed in three years.

The cost arrived from Washington. Trump initially called the deal a good thing on 15 January, then on 24 January 2026 posted that the US would impose a 100% tariff on all Canadian goods if Canada reached a trade deal with China, warning against Canada becoming a “drop off port” for Chinese goods. The threat has not been implemented, but it showed the limit of diversification: every step toward Beijing is priced by Washington. Two-way merchandise trade with China was C$124.8 billion in 2025, C$34.1 billion of it Canadian exports, making China the second-largest single-country partner. The agricultural logic behind the deal is set out in our profile of Nutrien and the Saskatchewan agri-export economy.

How was the India relationship rebuilt after the Nijjar rupture?

The India relationship went from the worst crisis in its history to a strategic partnership in roughly twenty months. In September 2023 Justin Trudeau told Parliament that Indian government agents may have been involved in the killing of Sikh separatist Hardeep Singh Nijjar in British Columbia. India denied it, both sides expelled diplomats and suspended visas, Canada closed three consulates, and in October 2024 Ottawa expelled High Commissioner Sanjay Kumar Verma and five others, with India expelling six Canadian diplomats in return. Bilateral trade, worth about C$9.36 billion in 2023, was frozen at the political level.

Carney reopened the channel within weeks of taking office by inviting Narendra Modi to the G7 summit in Kananaskis, where the two met on 17 June 2025 and agreed to reappoint high commissioners and to hold a law enforcement dialogue. New envoys were named in August 2025, with Christopher Cooter going to New Delhi. Canada listed the Lawrence Bishnoi gang as a terrorist entity in September 2025, and by March 2026 RCMP Commissioner Michael Duheme had affirmed that India was no longer linked to violent crime in Canada, a claim that remains disputed by some Sikh organisations.

The commercial payoff came with Carney’s state visit to New Delhi and Mumbai in early March 2026, the first by a Canadian prime minister since 2018. On 2 March the two governments signed a Strategic Energy Partnership and a uranium supply agreement under which Cameco will deliver 22 million pounds of uranium concentrate over nine years for about C$2.6 billion. Negotiations on a Comprehensive Economic Partnership Agreement were launched with a target of C$70 billion in annual bilateral trade by 2030, and Energy Minister Tim Hodgson has since pursued critical minerals, uranium and LNG talks in India. Reporting in October 2026 indicated Ottawa is racing to conclude the pact by the end of the year. The uranium side of the story is told in our profile of Cameco and the nuclear revival.

Can LNG and critical minerals anchor the Indo-Pacific strategy?

LNG is the one diversification channel where physical capacity has unambiguously changed. LNG Canada at Kitimat, owned by Shell (40%), Petronas (25%), PetroChina (15%), Mitsubishi (15%) and Korea Gas (5%), shipped its first cargo in June 2025 from a 14 million tonne a year, two-train plant that cost about C$40 billion including the Coastal GasLink pipeline. By 23 February 2026 it had shipped 50 cargoes, mainly to Asia, with Japanese utilities Toho Gas and Tokyo Gas among the offtakers through Mitsubishi. On 29 September 2026 Shell announced plans to double capacity to 28 million tonnes a year. Malaysia has signed a letter of intent on LNG and nuclear cooperation, and the Pacific Link oil pipeline designated on 1 October 2026 would add a one-million-barrel-a-day crude route to the same coast.

Critical minerals are the second anchor. The International Energy Agency projects demand for key minerals rising two to four times by 2040, and six to eight times for lithium, and Canada is positioning uranium, nickel, copper, lithium and rare earths as its contribution to allied supply chains. The India uranium contract, a civil nuclear cooperation agreement with South Africa and the November 2025 UAE partnership, which came with a Foreign Investment Promotion and Protection Agreement and a stated C$70 billion (US$50 billion) sovereign investment commitment targeting critical minerals, energy infrastructure, ports and AI, are the headline deals. Qatar signed a strategic partnership in January 2026 covering trade, investment and AI, though two-way trade is only about C$325 million a year.

The question is whether deals become volumes. The UAE commitment is a pledge, not a pipeline of signed projects; the India CEPA is still being negotiated; and Canada’s critical minerals strategy has struggled to move projects from permitting to production, as our article on the critical minerals strategy and the EV battery supply chain explains. Foreign direct investment into Canada did reach C$93.6 billion in 2025, the decade’s highest for a second year, but 56% of it still came from the United States.

Why does Washington treat diversification as a provocation?

The US has responded to Canadian diversification as if it were a breach of loyalty rather than ordinary commercial hedging, and that response is itself a constraint on how far Canada can go. The clearest example is the 24 January 2026 threat of a 100% tariff over the China arrangement, which came nine days after Trump had called the deal a good thing. During the August 2026 negotiations that preceded the Section 338 tariffs, Carney said the US had tried to restrict Canada’s ability to pursue other trade deals, which he cited as one of the reasons Canada walked away. The subject is explored in our account of the 2025-2026 trade war.

The same pattern runs through the CUSMA review. Washington’s demands for tighter rules of origin and “economic security” provisions are aimed at Chinese content in North American supply chains, which means Canada’s EV quota and steel remissions for China are now negotiating issues in a separate forum. The USTR’s October 2026 request for comments on the 2027 review explicitly asks about cooperation against other countries’ “non-market policies”.

Carney’s framing, set out at Davos in January 2026, is that the world order is undergoing a “rupture” and that “middle powers” should cooperate as a counterweight to both Washington and Beijing. The EU, Japan, South Korea, India and the Gulf states are the intended partners in that project. Whether it is sustainable depends on how much economic pain the United States is willing to inflict, and the 2026 record suggests the answer is considerable.

What should Canadian exporters actually do differently?

The practical answer is that diversification works for some products and not for others, and the dividing line is value density. Canola, uranium, LNG, pharmaceuticals, software and aerospace components travel well; steel coil, softwood lumber and assembled vehicles do not, which is why those sectors have borne the trade war’s cost regardless of how many agreements Ottawa signs. Exporters in the first group should be using CETA and CPTPP preferences now; fewer than two-thirds of eligible Canadian firms claim CETA rates, which means a third are paying tariffs they could avoid with correct origin paperwork.

Canada’s export credit and trade promotion machinery has been reoriented. EDC’s C$825 million Indonesia facility, the CanExport programme and a Trade Commissioner Service with 85% of staff outside the US are the tools. The Regional Tariff Response Initiative offers liquidity support and “pivot project” funding to businesses retooling for new markets. For small and mid-sized firms the binding constraint is often knowledge: which CPTPP member has the lowest non-tariff barriers for a given product, how to certify origin under three different agreements, and which Canadian port can handle the volume.

Software and services exporters are the exception that proves the rule. Shopify and Cohere face no tariffs, no rules of origin and no port bottlenecks; their diversification question is regulatory, around data flows and AI governance, which is why Canada’s CUSMA submissions ask for alignment on exactly those issues. The city-level picture, including which hubs are winning non-US investment, is set out in our Toronto entry in the City Startup Atlas.

What can founders and investors learn from Canada’s diversification push?

The central lesson is that trade agreements create options, not outcomes, and the value of an option depends on whether a business has the logistics, certification and sales capacity to exercise it. Three further lessons follow from the 2025-2026 record.

First, the fastest diversification wins came from fixing a specific blocked flow rather than from signing broad agreements. The China arrangement unlocked about C$4 billion of canola trade within six weeks because the product, the ships and the buyers already existed; CETA has taken nine years to lift Canada-EU trade 81% because the auto and food supply chains it was meant to redirect never materialised. Investors should favour companies whose diversification plan names a customer, not a treaty.

Second, every hedge has a counterparty who notices. Canada’s China deal triggered a 100% tariff threat from Washington; its SAFE participation and EU defence partnership have so far drawn no retaliation because defence procurement is politically different from EV imports. Firms should expect US scrutiny of Chinese content to intensify and should document supply chains accordingly.

Third, the hard constraint is infrastructure, and that is a decade-long investment. Pacific Link (2032-2033), LNG Canada Phase 2 (announced September 2026), port expansion and the east-west rail links described in our story on CN and CPKC will determine whether the doubling target is met in 2035. Other mid-sized exporters facing a dominant neighbour have walked the same road; the UK Company Stories hub covers Britain’s post-Brexit search for non-EU markets, a cautionary comparison.

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