In 2024 exports to the United States supported 2.5m jobs in Canada and about a sixth of GDP. In January the Bank of Canada estimated that GDP would be 1.5% lower by the end of 2026 than had Mr Trump stayed his hand. CANADA IS IN a strange position. The greatest threat to its economy comes from its close ally and biggest trading partner. Donald Trump attacked as soon as he took office, prosecuting a uniquely intense trade war against his northern neighbour.
None of this can quickly make up for the degradation of the economic relationship with the United States; Canada’s goods-and-services exports to the European Union increased by C$9.5bn ($6.8bn) in 2025, while sales to the United States declined by C$26.3bn. Mr Carney promised them tax breaks on business investment worth C$36bn over the next five years, 7% of the federal corporate-tax take. The Canadian government says the summit has yielded C$500bn in investment commitments, though it did not specify the period over which this investment would be made. In 2025 a total of C$387bn was invested in Canada, not including housing. Even after trade increased by almost a fifth in 2025, just 1.3% of the EU’s goods imports came from Canada, worth €33bn.
He allowed counter-tariffs to come into effect on September 8th after rejecting an American deal that he said was not in Canada’s interest. The finance ministry said the cuts would give the country a marginal effective tax rate on new business investment that is one third of the OECD average. “We’re ready to put the money in the ground,” BlackRock’s boss, Larry Fink, told conference attendees. he called Canada “the most European of non-European countries” While in France. One of Mr Carney’s senior officials said they hope the outlines of a deal will be reached by the end of the year.
Mark Carney, Canada’s prime minister, has not been idle. He has recently spent more time in Europe and Asia than in the United States, drumming up investment and pushing new trade deals and alignment. And he has cut taxes at home in an effort to draw in global capital. But in constructing credible new routes to market for Canada, he hopes to encourage investment that can buoy up the economy even as American business ebbs. In the past week the outline of the plan has become clearer. On September 14th and 15th Mr Carney welcomed financial giants from around the world to Toronto for an investment summit. Big American firms such as BlackRock, Blackstone and Berkshire Hathaway risked drawing Mr Trump’s ire to turn up. Mr Carney reiterated his promise to reduce the time needed to approve major infrastructure projects, and made a surprise offer to privatise four of Canada’s largest publicly owned airports. The masters of the universe seemed impressed. “Even in this more challenging world for supply of capital, Canada will be a large beneficiary. The Canadian leader has long been a Europhile. He earned his doctorate at Oxford, married a Briton and became the only foreigner to run the Bank of England. Senior officials in his government say they were instructed in those very early days to completely reimagine the relationship with Europe. There is much potential benefit for each side. Europe has expertise in technology, the ability to scale up Canada’s defence-manufacturing ambitions, deep pools of capital and 450m prosperous consumers. Canada has vast reserves of energy and critical minerals. The two also maintain a non-Trumpian belief in free trade. Canada and the EU already have a free-trade agreement, but Canada remains a small supplier to the bloc. So there is scope for more to offset American declines. The details of any associate membership will be subject to negotiations over the next few months. Many of Canada’s standards look more American than European, for instance, especially in agriculture. Mr Carney also spoke of integrating financial services, youth mobility, and co-operation on energy, all of which could help shore up the Canadian economy.
Three days after becoming prime minister last year, his first foreign trip was not to Washington, DC, as is the custom, but to London and Paris.
In July the Bank of Canada said it expected the economy to grow by just 0.7% in 2026, down one percentage point from 2025. But Canada does not need the EU’s almost-€4trn market for imported goods and services to grow fast, just its share. And Mr Carney needs options if he is to maintain any leverage with Mr Trump as he continues negotiating over a deal he believes to be disadvantageous to Canada. Meanwhile the economic outlook is darkening.
