According to new government data, Canadian companies are looking for additional alternate markets to reduce their economic reliance on a US economy that is still somewhat affected by tariffs.
Exports from the United States, Canada’s largest trading partner, fell by 10 percentage points between May 2024 and May 2025, accounting for 68% of overall exports.
The decline especially impacted durable goods, including automobiles and automotive parts, as well as steel and aluminium products.
It follows several protectionist measures adopted by the administration of President Donald Trump, among them 50% tariffs on steel and aluminium and 25% tariffs on Canadian-made cars.
Economic progress has been stifled to a degree by these measures by disrupting trade flows and forcing Canadian exporters to search for markets that can help balance the economic pain.
UK, Asia, and Europe see growth in Canadian trade
To expand its global commercial presence, Canada has increased exports to a broader range of small and medium-sized countries.
Singapore, Indonesia, the Netherlands, Italy, Brazil, Australia, Germany, and Japan are some of the new markets witnessing expansion.
These commodities have found their way into an increasing share of the exchange viability of these pays, leading to a partial offset of the lost US revenue.
Trade data further indicates that the UK has now surpassed China as the No.2 destination for Canadian exports.
It comes as trade with China has plummeted in the wake of yet another trade dispute, this time over canola and crude oil.
Between March and May 2025, Canada’s gold exports to the UK skyrocketed, value up 473% and volume up 312% over the same months a year previous.
This surge, however, is only temporary, and experts warn that gold exports are largely cyclical based on global uncertainty, meaning they cannot be a solid foundation upon which to build long-term diversification in trade.
Efforts to diversify face structural limits
Despite positive signs of market expansion, Canada’s deep-rooted trading links with the United States continue to underpin the economy.
The United States remains Canada’s primary partner, with no other country accounting for more than 10% of exports.
Long-established supply chains and decades of economic integration make it difficult for Canadian enterprises to completely exit the US markets.
Although some companies are creating offices in Europe and Asia to encourage new relationships, economists believe this development cannot counteract the scale of US-bound commerce.
The sheer size of the US market, along with logistical efficiency, keeps American trade connections at the heart of Canada’s economic strategy.
Export growth abroad fails to offset US decline
Canada’s export value to the United States declined by C$7.7 billion year on year in May, from C$51.61 billion in May 2024 to C$43.93 billion in 2025, a 15% decline.
During the same period, exports to foreign countries increased by about 42%, or C$5.7 billion. However, this gain was insufficient to cover the loss in US commerce, leaving a C$2 billion imbalance.
The Canadian government is still working on a resolution with the United States, with a trade agreement expected by July 21. If no agreement is achieved, Canada may levy additional punitive tariffs.
Meanwhile, Canadian exporters are striving to mitigate their risks by expanding into new markets, but the road to true diversification remains long.
US tensions force a rethink, but not a breakup
While recent actions indicate a real attempt at diversification, Canada is not abandoning its trading relationship with the United States.
The current policy appears to be targeted at increasing resilience rather than replacing a vital economic partner.
Trade officials underscore that diversification is a supplement, not a substitute, for US trade.
In short, the facts imply that Canada’s diversification is driven by necessity rather than strategy.
The long-term ramifications of this transition will be determined by global market dynamics and the outcome of continuing trade negotiations with Washington.
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