Canadian Prime Minister Mark Carney is pushing an ambitious trade diversification strategy aimed at reducing Canada’s heavy reliance on the United States and positioning the country as a leader in a new, more flexible global trading order. Triggered by U.S. President Donald Trump’s aggressive tariff policy and threats against allies, Carney has accelerated efforts to forge new economic partnerships, including a rare recent trade deal with China. His approach goes beyond that of many Western allies, reflecting a belief that the traditional, U.S.-led rules-based trading system is fragmenting.
Carney’s trade vision:
Carney has openly argued that multilateral institutions and global trade rules are being eroded, making smaller “plurilateral” agreements between select countries more viable than broad global deals. He has cast Canada as a bridge between the European Union and Pacific Rim economies and pledged to double non-U.S. exports over the next decade. Diplomatic outreach to countries long peripheral to Canadian trade policy including Qatar, Ecuador, Indonesia, and the UAE signals a deliberate effort to widen Canada’s economic map.
China as a necessary partner:
China has emerged as a central, if controversial, pillar of Carney’s strategy. As Canada’s second-largest trading partner, Beijing offers the scale required to meaningfully offset U.S. dependence. Carney’s assertion that China has become a more “predictable” partner than the United States underscores Ottawa’s frustration with Washington, but it has raised alarms among trade experts. Economists warn that deeper integration with China risks exposing Canadian industries to market flooding and long-term strategic vulnerabilities, particularly as Chinese exports are increasingly redirected away from the U.S. to other markets.
Limits of diversification:
Despite diversification efforts, the United States still absorbs close to 70% of Canadian exports—far more than the EU’s roughly 20% exposure to the U.S. market. Analysts note that reducing U.S. export share by even 10% would require Canada to double exports to multiple large economies simultaneously, an extraordinarily difficult task. Energy trade illustrates the challenge: while Ottawa hopes to expand oil exports to Asia, about 90% of Canadian crude continues to flow south of the border.
Comparisons with Europe:
The European Union’s parallel push to diversify trade through deals with Mercosur, Indonesia, and renewed talks with India and Southeast Asia highlights both inspiration and contrast for Canada. Europe’s lower baseline dependence on the U.S. gives it greater room to manoeuvre, whereas Canada’s economy remains deeply integrated with U.S. supply chains. Ongoing negotiations over the U.S.-Mexico-Canada Agreement further limit how aggressively Canadian firms are willing to pivot away from the American market.
Expanding the deal pipeline:
Carney has markedly increased the pace of trade diplomacy. Canada has concluded agreements with Ecuador and Indonesia, signed investment deals with the UAE, and restarted talks with India after a diplomatic freeze under the previous government. According to Trade Minister Maninder Sidhu, Ottawa is now targeting the Philippines, Thailand, Mercosur, Saudi Arabia, and India, aiming to complete multiple agreements in a timeframe that traditionally yielded just one deal per year.
Analysis:
Carney’s strategy reflects a clear-eyed assessment that U.S. economic leadership can no longer be taken for granted. His emphasis on plurilateralism and diversification is politically resonant and strategically necessary, but structurally constrained. Canada’s geography, supply chains, and energy infrastructure tie it to the U.S. in ways that cannot be rapidly undone. Engagement with China may provide short-term relief and bargaining leverage, yet it introduces its own economic and strategic risks. Ultimately, Carney’s bid to shape a new trade order is less about replacing the United States than about buying insurance against American volatility. Whether that insurance proves sufficient will depend on how quickly Canada can translate diplomatic activism into durable, balanced trade flows.
With information from Reuters.
