To answer the main question, Canada is unable to completely separate financially from the United States. They have one of the most interconnected and integrated trading relationships in the world.
However, due to recent events, the Canadian government is striving to diversify its trading relationships.
Their goal is to reduce reliance on the United States government and the financial market it sustains.
America is one of Canada’s largest export markets, and America’s largest source of imports is from Canada, making their economies extremely connected. This means that if one country does well, so does the other. About 25.2% of Canada’s gross domestic product (GDP) is reliant on exports, and about 76% of these exports go to the United States. The main industries that are vulnerable to the dwindling trade between the countries include the automobile, agriculture, and energy sectors. The Canadian and the American economies have been interconnected since the Automotive Products Trade Agreement that was signed in 1965 and the North American Free Trade Agreement (NAFTA), which came into effect on January 1, 1994. Both of these agreements aimed to free up the automotive industry in North America by eliminating tariffs and trade barriers, making the markets more integrated and efficient. Between 2010 and 2017, both markets have been growing at relatively similar rates, but in the last couple of years, the United States’ GDP growth has surpassed Canada’s. This may be due in part to the recent tariffs that President Donald Trump has implemented. These tariffs have caused a decrease in the import of Canadian goods, causing a major loss in Canada’s exports by as much as 27%, one of the worst quarters ever. But these tariffs are just one of the many reasons for such a severe separation of the Canadian and the United States’ economies. One of the main problems for Canada is that it has weaker labour productivity compared to the US, and due to this, financial analysts predict that this trend of growth disparity will continue if Canada doesn’t pivot and adapt; analysts say that Canada’s ability to diversify from the United States economy is reliant on moving away from the export-dependent model.
With the heightened political tensions between Canada and the United States, the Canadian federal government has begun to move away from the export-dependent model and has promised to focus on spending more in areas such as infrastructure, like ports, and expanding production ability. The Canadian government wants to focus on more foreign markets, such as Asia and Europe. Internally, there is also a focus on boosting exploration and innovation in the economic sectors, while also investing in clean energy, electric vehicles, and domestic manufacturing.
The Canadian people are also doing their part to attempt to limit the harmful effects of the tariffs on their economy and prevent their hard-earned money from stimulating the United States economy.
Many Canadians are focused on buying goods made in Canada, boycotting goods made in the US, and limiting travel to the US. Some shoppers have even committed to spending a bit more in order to shop Canadian. There has also been an increase in Canadian-centric merchandise, including “elbows up” and “Canada’s not for sale” merchandise. Many Canadians are also no longer traveling across the border to do their shopping and are focused buying on more domestic and local goods. There has also been a saying coined, the “trade war”, referring to the tariffs imposed on Canadians and the trade talks between President Donald Trump and Prime Minister Mark Carney. Over the summer, the number of Canadians traveling to the United States dropped by 22.1 per cent for air travel and by 33.1 per cent for land travel. Some families have stopped visiting their American counterparts in the United States, and the Americans have started to travel to Canada. The U.S. Travel Association has released a forecast predicting a 3.2 per cent decline in international tourism spending in the country for 2025, causing a loss of 5.7 billion US dollars. The states closest to the border, including Vermont, Maine, and New York, have already felt some losses in regard to tourism since the election. Some companies have attempted to create different incentives or group tours to increase tourism. As the year progresses with many changes implemented, there is an expected economic growth in Canada of about 0.75% for the rest of 2025 and an annual growth with an average of 1.4% for 2026 and 2027. Although the United States relies on fewer of Canada’s imports and exports than Canada does, a lot of tourism comes from Canada to the United States, stimulating the economy, and Canada is the United States’ top supplier of oil, gas, and electricity, so the effects of Canada’s actions may soon be felt.
