What are Canada’s Economic Ties with the USA?

Canada has always shared a unique economic relationship with the United States, shaped by geography, history, and convenience. Since the North American Free Trade Agreement (NAFTA) came into effect in 1994, Canada has relied heavily on the USA as its primary trade partner, with a large majority of its exports still crossing the border today. However, this dependency comes with risks, as highlighted by recent remarks from the new U.S. president. His claim that the USA spends billions defending Canada, paired with a veiled threat of economic pressure, forces us to re-examine Canada’s economic independence. While this rhetoric may be aimed at stirring nationalistic sentiment in the U.S., Canadians cannot ignore the implications of such statements.

The Historical Context of Canada’s Trade Dependence

Canada’s over-reliance on its southern neighbor is not new. Many years ago, in the 90’s, my high school economics teacher warned that our trade imbalance made us vulnerable. At the time, nearly 80% + (and more) of our trade was with the USA, and diversification seemed like a distant dream. Today, despite incremental progress with agreements like CETA (with Europe) and the CPTPP (with Pacific Rim countries), the USA remains Canada’s most dominant partner. It’s easy to see why: shared borders, similar values, and decades of trust make it a familiar partner. But in a world of shifting geopolitics, sticking to familiarity could be a dangerous trap. Diversifying trade is no longer a luxury—it’s a necessity.

Addressing U.S. Rhetoric and Economic Pressure

The president’s remarks about using “economic force” to bring Canada “to its knees” are as much a reflection of internal U.S. struggles as they are a warning to Canada. The United States faces its own economic challenges, and it’s clear their interest in Canada’s resources—from oil to rare minerals—is growing. This is where Canada must tread carefully. Diversifying trade with regions like Asia and Europe will undoubtedly provoke reactions from the U.S., but sovereignty comes with tough decisions. While the USA might not welcome a neighbour aligning with other powers, Canada must prioritize its own economic resilience. If the USA values a stable, prosperous northern border, they should recognize that a strong Canada benefits both nations.

Seizing Opportunities for Economic Growth

Optimistically, this moment presents an opportunity for Canada to lead by example. By investing in infrastructure, clean energy, and emerging markets, Canada can show the world—and its southern neighbour—that economic independence is not an act of defiance but a strategy for mutual growth. The USA-Canada border should symbolize cooperation, not coercion. As Canadians, we value our partnership with the United States, but we cannot compromise our future for the sake of convenience. Diversifying our trade, strengthening our industries, and maintaining our sovereignty will ensure Canada thrives, no matter what rhetoric comes from Washington. Let’s use this moment as a catalyst for growth, not fear.