Despite efforts to diversify its trading partners, the Canadian economy still remains heavily dependent on trade with the United States. What truly harms the Canadian economy are the sectoral tariffs imposed under Section 232.
Tariffs applied under Section 232 of the 1962 U.S. Trade Expansion Act cover a wide range of products such as steel, aluminum, and lumber, and are generally not exempt under the Canada–United States–Mexico Agreement (CUSMA). In exchange for lifting some of these tariffs, Trump wants American dairy products to become more readily available in Canada. This is Canada’s most sensitive issue, and it does not want to open its milk and dairy market to U.S. products.
The Canadian economy is highly dependent on the U.S. economy. In 2024, 76% of Canada’s $592 billion in exports went to the United States, though this figure fell to 67% in 2025. Even though tariffs reduce exports, the economic relationship remains deeply rooted. To answer the question of how dependent Canada’s economy is on the U.S.: Canada exports 96% of the oil it produces and 100% of its natural gas to the United States. In the natural gas and oil sectors, 73% of employees are tied to exports to the U.S., while in the manufacturing and automotive sectors, 63% of workers are linked to exports to the U.S.
A 9,000 km border is at issue, and the Atlantic Ocean represents the biggest cost barrier for Canada in accessing the EU market. Selling its oil and natural gas to the EU appears difficult even in the medium term. However, the central government budget, supported by a strong fiscal structure, allows for the adoption of various measures. The budget announced by the Mark Carney government at the end of last year targets an investment incentive plan totaling $1 trillion over five years. The plan promises generation-long investments in key projects, including $25 billion for housing, $30 billion for defense and security, $115 billion for major infrastructure, and $110 billion to boost productivity and competitiveness.
For this reason, Canada is seeking alternative ways forward. Mark Carney is moving to repair the diplomatic relations with India and China that deteriorated during the Justin Trudeau era, aiming thereby to diversify and strengthen Canada’s trade partners.
Canada–China relations had not been going well for nearly a decade. In particular, the arrest in Vancouver in 2018 of Meng Wanzhou—Chief Financial Officer of China’s telecom giant Huawei and the daughter of the company’s founder—at the request of the United States, on allegations of fraud related to Iran sanctions, triggered a major diplomatic crisis between China and Canada.
She was initially placed under long-term house arrest and was later released following an agreement that also led to the release of two Canadians who had been detained in China. During Meng Wanzhou’s extradition proceedings, China imposed tariffs on Canadian canola and other agricultural products. In retaliation, then–Prime Minister Justin Trudeau announced in the summer of 2024 that Canada would impose a 100% tariff on Chinese electric vehicles. This move stemmed from an effort to stay aligned with the United States. China responded by launching an anti-dumping investigation into Canadian canola imports. In March 2025, Beijing imposed 100% tariffs on Canadian canola oil, canola meal, and peas, and 25% tariffs on pork and seafood.
With this background in mind, the significance of the agreement Mark Carney reached with China a few days ago becomes clear. Under the deal, the two countries essentially agreed to eliminate customs duties on certain products and reduce them on others.
Canada agreed to allow 49,000 Chinese electric vehicles to enter the Canadian market at a customs duty rate of 6.1%. This rate had been in effect before Ottawa imposed a 100% tariff on all Chinese electric vehicles in 2024. In that sense, the move can be seen as a correction of a previous mistake.
In return, Mark Carney said he expects China to reduce the tariffs imposed on Canadian canola by March to 15%. Beijing will also remove, as of March, the tariffs applied to Canadian canola meal, lobster, crab, and peas. It was stated that progress has been made in resolving issues related to Canadian pork exports, but that China has, for the time being, kept in place the tariffs it applies to Canadian pork.
Ontario Premier Douglas Ford, meanwhile, is drawing attention to the risk that Canada—a country with high environmental standards—could be flooded by vehicles from China that are supported by cheap labor and heavy subsidies, and he is considering taking measures at the provincial level in response.
In fact, the struggle between Canada and the United States resembles the story of David and Goliath. If Canada’s prudent steps under Mark Carney’s leadership, combined with Trump’s approach of criticizing and questioning the “law of the jungle,” succeed in binding medium-sized countries more closely together, it appears likely that Trump’s America will be led into further diplomatic missteps.
Finally, it is well known that the Arctic, Canada’s Arctic territories, and the sea routes opening up due to melting ice will give Canada strategic importance over the next ten years. Trump’s Greenland…
Prof. Dr. Aylin Seçkin Georges
is an experienced economist who serves as a visiting professor at the University of Ottawa. After graduating from the Department of Economics at Boğaziçi University, she completed her master’s degree in European economics at Université Libre de Bruxelles and earned her PhD in economics at Carleton University in Canada. Throughout her academic career, she has worked at institutions such as the CIRANO Research Centre and the University of Montreal in Canada, and she taught for many years as a professor at Istanbul Bilgi University in Türkiye. Her research interests include the economics of art and culture, population aging, macroeconomics, and international trade. Georges’s work has been published in leading academic journals such as Empirical Economics, Journal of Cultural Economics, and Economic Modelling. She is also the author of the book The Economy of Arts. In addition, she hosts a program titled The Economy of Everything on FluTV, aiming to make economic issues accessible to a broader audience.
