Canada Seeks New Economic Routes Amid US Trade Tensions

Canada's Prime Minister Mark Carney is trying to redirect his country's economy away from its reliance on the United States. The US is Canada's biggest trading partner and closest ally, but it has been a major source of economic stress due to trade wars under President Donald Trump.

The Bank of Canada estimates that GDP would be 1.5% lower by the end of 2026 if Trump had not launched his trade war. To mitigate this effect, Carney has allowed counter-tariffs to come into effect and cut taxes at home to attract global capital.

Carney also hosted an investment summit in Toronto that attracted big American firms like BlackRock and Berkshire Hathaway. He offered them tax breaks worth C$36bn over five years, which would give Canada a marginal effective tax rate on new business investment one-third of the OECD average.

The summit yielded C$500bn in investment commitments, although it's unclear when this investment will be made. Carney also wants to align Canada with Europe and other middle powers, and has discussed associate membership with the European Union. However, some experts warn that hitching Canada's economic wagon to the EU could be a bad idea due to its stagnant growth and bureaucracy.