Mark Carney is heading deeper into Europe with an ambitious message: Canada needs more economic partners, more investment options and less dependence on a United States that has become increasingly unpredictable on trade. The arithmetic explains both the urgency and the difficulty.
In 2025, 71.7% of Canadian merchandise exports still went to the United States, roughly the 72% highlighted in the debate over diversification. That was down sharply from 75.9% a year earlier, and newer monthly figures show further movement away from the U.S. market. Yet decades of integrated factories, pipelines, electrical connections and cross-border supply chains cannot be recreated across the Atlantic quickly. Europe may give Canada a powerful second pillar. Building it into anything resembling an alternative to the United States will take considerably longer.
The 72% Number Is Falling, but It Remains Enormous
Canada has already made measurable progress in reducing its reliance on the American market. Statistics Canada says the U.S. share of Canadian merchandise exports dropped from 75.9% in 2024 to 71.7% in 2025. Exports to the United States fell 5.8% during the year, while exports to countries elsewhere climbed 17.2%. Those numbers suggest diversification has moved beyond political rhetoric and begun showing up in actual trade flows.
The shift accelerated further in 2026. In July, Canada exported $76.1 billion worth of goods, with $50.5 billion going to the United States. That put the American share at roughly 66.3% for the month. At the same time, exports to non-U.S. destinations reached a record $25.6 billion, accounting for 33.7% of the total. That is meaningful progress, but it also illustrates the scale of the challenge: even after a historic trade disruption, the United States still absorbs about two-thirds of Canadian goods in a typical recent month.
Geography Gives the United States an Advantage Europe Cannot Copy
The Canada-U.S. relationship is not simply the product of favourable trade rules. It is built into the physical geography of the economy. Trucks can cross the Windsor-Detroit border several times while a vehicle is being assembled. Pipelines run directly from Canadian producing regions into American refineries. Power grids connect provinces with neighbouring states, allowing electricity to move across the border without an ocean voyage or a major new export terminal.
Energy makes that dependence particularly visible. Canadian crude oil, refined petroleum products, natural gas and natural gas liquids sold to the United States were worth about $157.5 billion in 2025, equal to more than one-fifth of Canada’s worldwide goods exports. Roughly 90% of Canadian crude oil exports still went south. Canada and the U.S. are also linked by 86 international power lines. Europe may be politically attractive, but replacing infrastructure built over generations requires more than signing another trade agreement.
CETA Gives Carney a Head Start
Canada is not starting from scratch in Europe. The Comprehensive Economic and Trade Agreement has been provisionally applied since 2017, removing tariffs and reducing other barriers across large parts of the Canada-EU commercial relationship. Canadian government figures show bilateral merchandise trade with the European Union increased by more than 77% between 2016 and 2025.
The overall relationship is substantial. Canada-EU trade in goods and services reached about $178.6 billion in 2025, making the bloc Canada’s second-largest trading partner after the United States. Germany alone recorded $34.3 billion in two-way merchandise trade with Canada last year, while trade with France reached $15.2 billion. CETA therefore gives Canadian businesses something valuable: an existing framework rather than an entirely new market. The problem is scale. Even rapid percentage growth from Europe starts from a much smaller base than North American commerce, meaning years of strong growth would still leave the U.S. dominant.
Carney Wants Something Deeper Than Another Free-Trade Deal
Carney’s latest European push goes beyond selling more lumber, minerals or manufactured goods. The prime minister has spoken about creating a “unique alliance” with the European Union while making clear that Canada is not pursuing full EU membership. His September trip includes Strasbourg, where he is scheduled to address the European Parliament, followed by Britain, with trade, defence, energy, artificial intelligence and critical minerals all on the agenda.
Ottawa has already been building that architecture. Canada and the EU launched a new strategic partnership in 2025 and strengthened security and defence cooperation. In February 2026, Canada became the first non-European country to join the EU’s Security Action for Europe initiative, opening additional opportunities for Canadian defence businesses. Another Canada-EU summit is scheduled for late October. The strategy therefore looks less like replacing one export customer with another and more like embedding Canada within a wider European economic and security network.
Canadian Exporters Cannot Simply Change Customers Overnight
For a government, diversification can be expressed in speeches and agreements. For a small manufacturer in Ontario or Quebec, it can mean redesigning a product, obtaining new certifications, hiring sales staff overseas and paying considerably more to deliver merchandise. That helps explain why Canada’s export geography has historically changed slowly even when businesses say they want alternatives to the United States.
Statistics Canada counted 47,948 goods-exporting enterprises in 2025. About 85.7% of Canadian exporting establishments sold something to the United States, while only 34.8% of exporting enterprises reached non-U.S. destinations. Three-quarters of Canadian exporters dealt with just one foreign partner country, with small businesses especially concentrated. Bank of Canada consultations have found that transportation costs, regulatory requirements and specialized equipment remain major barriers to entering new markets. For companies built around overnight trucking to an American customer, sending products across the Atlantic represents an entirely different business model.
Trans Mountain Shows Infrastructure Can Change Trade Patterns
Canada’s oil industry offers one of the clearest examples of what meaningful diversification actually requires. The expanded Trans Mountain pipeline increased Canada’s access to the Pacific Coast, giving producers a practical route to customers beyond the traditional network of American refineries. The result was visible quickly once the infrastructure existed.
Exports of Canadian crude oil to countries outside the United States jumped 132.6% in 2025 to 27.2 million cubic metres. Non-U.S. destinations captured 10.9% of Canadian crude exports, more than triple their average share between 2016 and 2024. Yet about 90% of Canada’s crude still went to the United States. The lesson applies directly to Carney’s European ambitions. Trade agreements create permission to trade; infrastructure creates the ability to trade economically. New ports, energy terminals, rail links, processing facilities and shipping capacity may ultimately matter as much as diplomatic agreements if Canada wants diversification to become permanent.
Critical Minerals Could Be Canada’s Strongest European Opening
Bulk commodities are expensive to redirect across oceans, but strategic minerals give Canada a different opportunity. Europe wants dependable supplies of materials needed for batteries, defence equipment, power grids, advanced manufacturing and digital infrastructure. Canada, meanwhile, is trying to attract investment that moves its mining industry further into processing and higher-value production rather than simply shipping raw material abroad.
Ottawa’s current critical-minerals strategy includes billions of dollars for infrastructure, project development and strategic investments. Canada and the EU already have a raw-materials partnership designed to strengthen supply chains, while the federal government is creating new mechanisms for equity investments, loan guarantees and offtake agreements. That alignment gives Carney a credible economic pitch in Europe. Copper, nickel, uranium, lithium and other strategic resources could support relationships that are difficult for Washington to monopolize. The larger prize would be attracting European companies to build processing and manufacturing capacity inside Canada.
Defence and Technology Could Diversify Faster Than Traditional Exports
The most successful part of Canada’s European pivot may ultimately occur outside the industries that dominate traditional merchandise trade. Defence procurement, artificial intelligence, research partnerships, data infrastructure and advanced technology generally depend less on proximity to a land border than industries such as autos, lumber or bulk energy. Those sectors are increasingly prominent in Ottawa’s discussions with European governments.
Canada’s participation in European security initiatives is particularly significant because defence spending is rising across the continent. Ottawa is trying to position Canadian aerospace, manufacturing, technology and resource companies as suppliers to that expanding market. Carney is also discussing cooperation around data centres, artificial intelligence and energy infrastructure. These relationships may not quickly move the headline number showing the U.S. share of Canadian exports, but they could diversify where Canadian businesses earn revenue and where investment originates. In that sense, Europe’s value may initially be measured more in strategic industries and investment flows than in container volumes.
Europe Brings Its Own Regulatory Challenges
CETA removed many tariffs, but tariff-free trade does not mean friction-free trade. Canadian firms entering Europe still encounter different product standards, regulatory regimes, labelling requirements, certification systems and customer expectations. For companies designed primarily around North American standards, adaptation can involve real expense before the first European sale is made.
The Bank of Canada has repeatedly heard the same concern from exporters attempting to diversify. Transportation costs and regulatory compliance make distant markets harder to enter, and most firms that currently export to the United States have not yet built substantial non-U.S. businesses. Deeper integration with Europe could reduce some obstacles, but it could also require Canada to make difficult choices about regulatory alignment. Canadian companies have spent decades operating inside a largely North American production system. Any attempt to integrate more deeply with European markets will therefore involve more than diplomacy; businesses will need confidence that the potential market is large enough to justify adapting their operations.
Diversification Is Better Understood as Insurance Than Divorce
The most realistic goal for Carney is not to replace the United States. It is to make Canada’s economy less vulnerable to decisions made in Washington. The latest numbers suggest that process is already beginning. Non-U.S. merchandise exports expanded sharply in 2025, reached a record monthly level in July 2026 and are attracting a growing number of Canadian exporters. Europe provides an unusually large and wealthy market in which to continue that trend.
But the structure of Canadian commerce remains unmistakably North American. Energy networks, factories, roads, railways and business relationships all point south. Even after the U.S. share of annual merchandise exports fell to 71.7%, it dwarfed every other destination. Carney’s European pivot therefore represents economic insurance rather than an economic divorce. Success would mean that the next American trade shock hurts less because Canadian companies have customers, investors and strategic partners elsewhere—not that the United States suddenly stops being Canada’s most important market.
