Canadian companies diversify trade during U.S. tariff war but experts see limits

Trucks enter into the United States from Ontario, Canada across the Ambassador Bridge, Monday, Feb. 3, 2025, in Detroit. (AP Photo/Paul Sancya)

OTTAWA — Canadian companies are boosting trade with allies other than the U.S. and with smaller markets to minimize economic damage from President Donald Trump’s tariffs, government data shows.

While other markets have reduced Canada’s reliance this year on the U.S., its biggest export market by far, economists and consultants said there are limits to how much it can diversify.

“This is a good thing for Canadian diversification,” said Stuart Bergman, chief economist at Export Development Canada, a government agency. “It’s also important to mention that we are not looking to replace our U.S. business. That would be crazy.”

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Canadian government data shows exports to the U.S. dropped by 10 percentage points to 68 per cent of total exports between May 2024 and May 2025, primarily of manufacturing products such as cars and parts, and products made with steel and aluminum.

“In the face of global trade challenges, including unwarranted tariffs from the United States, Canada remains committed to expanding its global trade footprint and ensuring long-term economic resilience,” Global Affairs Canada, which represents the Foreign Ministry and the Trade Ministry, said in an emailed response.

The White House could not be immediately reached for comment.

Prime Minister Mark Carney’s Liberals won the April election promising to stand up to Trump and revamp Canada’s economy to be less dependent on its southern neighbor.

Statistics Canada data shows that in May the country exported more gold, petroleum, uranium and pharmaceuticals to close allies such as the United Kingdom and European Union, and to countries as far away as Australia and Indonesia, from a year earlier.

It has also increased exports of a variety of commodities to Singapore, Italy, the Netherlands, Indonesia, Australia, Brazil, Germany and Japan.

Trade data showed that from March to May, the UK replaced China as Canada’s second-biggest export market. Trade with China has slackened as canola and crude oil exports dropped amid another trade conflict.

In May, Canada’s gold exports to the UK surged 473 per cent by value and 312 per cent by volume compared with a year earlier.

But Bergman said bullion exports to the UK, the world’s main hub for gold trade, usually jump during times of crisis and might come down again when uncertainty over U.S. tariffs settles.

Although some countries have seen big jumps in trade with Canada, none account for even a tenth of Canadian exports, signaling that Canada may remain largely reliant on the U.S.

Carney hopes to reach a trade deal with Trump by July 21 or could slap the U.S. with more counter-duties if no deal is struck.

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While some Canadian companies are opening offices elsewhere, Canada’s heavy reliance on trade with the U.S. will continue because of interlinked supply chains and decades of trade relationships, said Mike Chisholm, an independent consultant for offshore trade.

Trump imposed 50 per cent tariffs on imports of steel and aluminum in March and 25 per cent tariffs on Canadian-made cars in April. Canada slapped retaliatory tariffs on the U.S.

Canada’s value of exports to the U.S. fell to $43.93 billion in May from $51.61 billion a year earlier, a drop of 15 per cent or $7.7 billion.

During the same period, Canada’s exports to the rest of the world increased by almost 42 per cent, or $5.7 billion, failing to make up for the dent left by lower exports to the U.S.

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Reporting by Promit Mukherjee; Editing by Caroline Stauffer, Rod Nickel and Chizu Nomiyama