Canada’s effort to broaden its economic relationships is increasingly running through Europe. Ottawa and Brussels are working toward deeper ties in digital commerce and critical minerals, building on the trade framework they already have under CETA. The push has gained urgency as Canada’s relationship with its largest trading partner, the United States, has become more uncertain.
International Trade Minister Maninder Sidhu entered this week’s G20 trade meetings with advancing the Canada-EU digital trade agreement among Ottawa’s stated priorities. At the same time, Canada and Europe are preparing for an October 29–30 summit where digital trade, critical minerals, energy and other strategic industries are expected to feature prominently. The objective is not to replace the enormous Canada-U.S. commercial relationship, but to give Canadian companies more places to sell, invest and build supply chains when conditions south of the border become unpredictable.
CETA Gives the European Push a Running Start
Canada is not trying to build a European commercial relationship from nothing. The European Union is already Canada’s second-largest trading partner for goods and services after the United States. Canadian government figures put combined Canada-EU trade in goods and services at $178.6 billion in 2025. Merchandise trade alone has grown by more than 77% between 2016, before CETA began operating provisionally, and 2025.
European figures tell a similar story. The EU says total goods-and-services trade with Canada reached roughly €130 billion in 2025, compared with €72.1 billion in 2016. Trade in services increased particularly quickly, rising 91% over that period. Those numbers matter because Ottawa’s latest strategy is less about signing an entirely separate trade relationship than adding new layers to an established one. CETA already lowered or removed many traditional trade barriers. Digital rules, mineral supply chains, industrial cooperation and investment are becoming the areas where both sides see room for the next stage of growth.
Digital Trade Is the Most Advanced New Agreement
The digital file has progressed beyond political speeches. Canada and the EU formally launched negotiations for a standalone Digital Trade Agreement on March 5, 2026, at the CETA Joint Committee meeting in Toronto. European Commission records show that negotiators subsequently held four rounds of talks between April and August, making this one of the most concrete pieces of the emerging Canada-Europe economic relationship. Sidhu again identified advancing those negotiations as a Canadian priority at the G20 meetings this week.
The proposed agreement is designed to complement rather than replace CETA. Both governments have said the goal is to provide more certainty for companies doing business digitally while maintaining consumer protections and an open online trading environment. In September, Prime Minister Mark Carney went further, telling European lawmakers that Canada and Europe should move toward more seamless digital trade covering non-agricultural goods and a wide range of services. The precise final obligations remain under negotiation, so businesses do not yet have a completed rulebook or implementation date.
Digital Rules Could Matter Most to Canada’s Growing Services Economy
Digital trade can sound abstract until it is translated into everyday business. A Toronto software company selling subscriptions in Germany, an engineering consultancy working remotely with clients in France or a Canadian financial-services company serving customers across several EU countries all depend on rules governing electronic transactions, data, cybersecurity and digital identification. The European Parliament has called for the agreement to address cross-border data flows, personal-data safeguards, online consumer protection, e-commerce and cooperation in fields such as cybersecurity, artificial intelligence and quantum technology. Those remain negotiating priorities rather than finalized provisions.
That matters because services are becoming a much larger component of Canadian trade. Global Affairs Canada reported that Canadian service exports reached a record $240 billion in 2025 and now account for almost one-quarter of total exports. Nearly half of those services are already sold outside the United States. A Canada-EU digital agreement therefore has the potential to support diversification without requiring factories, pipelines or ports to be constructed first. Reducing incompatible digital procedures or improving recognition of electronic systems can lower costs particularly for smaller companies that cannot maintain separate compliance systems for every foreign market.
Critical Minerals Are Becoming the Physical Backbone of the Relationship
The mineral side is developing differently. Canada and the EU already have a Strategic Partnership on Raw Materials, and in March 2026 they signed a new joint declaration aimed at strengthening cooperation on critical mineral supply chains, investment and industrial competitiveness. The European Investment Bank also signed a non-binding letter of intent with Canada that opened negotiations over arrangements that could eventually allow the bank to support eligible Canadian mineral projects. It was an important step, but not yet a commitment to finance specific mines.
The political ambition expanded again in September. Carney told the European Parliament that Canada possesses deposits of more than 34 critical minerals and argued that Canadian resources could be paired with European processing capabilities. European Commission President Ursula von der Leyen, meanwhile, announced plans for a European Corporation on Critical Raw Materials designed to help obtain and stockpile materials required for batteries, semiconductors, clean technology and defence. That creates an obvious potential link between European buyers seeking reliable supply and Canadian projects seeking long-term customers and financing.
Europe Wants Secure Supply While Canada Wants More of the Value Chain
Europe’s mineral strategy is driven partly by concentration risk. Under the EU Critical Raw Materials Act, the bloc has set 2030 benchmarks calling for domestic capacity equivalent to at least 10% of annual consumption in extraction, 40% in processing and 25% in recycling for strategic raw materials. It also wants no more than 65% of annual consumption of a strategic raw material to come from any single foreign country. Canada fits naturally into that diversification effort because it already has extensive mining resources, expertise and existing commercial connections with Europe.
For Canada, simply extracting rock and putting it on ships would leave much of the economic opportunity elsewhere. Federal mineral policy increasingly emphasizes processing, refining and downstream manufacturing as well. Ottawa launched its Canada Critical Minerals Accelerator in July with a strategic investment arrangement supporting expanded production at Teck’s Trail Operations in British Columbia. At the G7 summit in June, Canada also announced that France, Germany and Italy, along with South Korea, intended to work with Canada on mineral stockpiling. The emerging model therefore stretches from mines to processing facilities, stockpiles, manufacturers and eventually European end users.
The United States Still Dominates Canada’s Trade Map
Diversification should not be confused with economic separation from the United States. Geography, infrastructure and decades of integrated manufacturing mean the American market remains far larger for Canadian exporters than Europe. Statistics Canada reported that 71.7% of Canadian merchandise exports went to the United States in 2025. That was down noticeably from 75.9% in 2024, but it still means roughly seven of every ten dollars in Canadian merchandise exports crossed the U.S. border.
What changed in 2025 was the direction of travel. Canadian merchandise exports to the United States fell 5.8%, while exports to other countries rose 17.2%. Statistics Canada also found that more Canadian firms began exporting outside the United States: the number of enterprises selling into non-U.S. destinations increased 1.8% in 2025 while the number exporting to the American market declined. Some of the non-U.S. growth reflected unusually strong precious-metal exports, so the shift should not be interpreted as a complete restructuring of Canadian trade. It does, however, show that diversification has already begun appearing in the data.
Washington’s Trade Dispute Has Added Urgency
The strategic push toward Europe predates the latest Canada-U.S. dispute, but worsening trade friction has added pressure. The Canadian Press reported on September 30 that Ottawa is explicitly trying to reduce its economic reliance on the United States following repeated U.S. trade actions against Canadian products. Sidhu is still expected to communicate with U.S. Trade Representative Jamieson Greer at the G20 meetings, demonstrating that Ottawa is simultaneously managing the American relationship and developing alternatives elsewhere.
Reuters reported on September 25 that the Trump administration saw no urgency to resolve the current dispute with Canada. Canadian and American governments have exchanged tariff measures, while several Canadian sectors face uncertainty about future access to the U.S. market. Ottawa’s response has been to frame diversification as risk management rather than an attempt to eliminate American trade. That distinction matters economically: replacing the U.S. market wholesale would be unrealistic in the foreseeable future, but securing additional European customers for minerals, technology and services could reduce the damage caused when particular U.S. sectors become subject to new barriers.
Europe Is Only One Part of Ottawa’s Diversification Strategy
The European negotiations sit inside a much wider Canadian strategy. Ottawa says it wants to double exports to non-U.S. markets over the coming decade, generating roughly $300 billion in additional trade. The federal government has been pursuing agreements and commercial relationships across Europe, Asia, the Middle East and Latin America, while creating a Strategic Exports Office designed to help Canadian firms compete for major international opportunities.
Recent activity illustrates the scale of that effort. Canada has pursued closer trade negotiations with India, Mercosur, ASEAN members and the United Arab Emirates while organizing large business missions to countries such as Japan. A June mission to Japan involved roughly 175 Canadian business organizations and produced 14 announced commercial agreements valued at more than $1.7 billion. The significance of Europe is that it combines a large established market with an existing free-trade framework and increasingly aligned priorities in minerals, defence, technology and energy. That makes the EU one of the most developed alternatives available to Canadian businesses, even if it cannot match the United States in geographic convenience or overall trade volume.
Financing Could Determine Whether the Mineral Strategy Actually Works
Political agreements do not automatically turn mineral deposits into operating mines. New mines and processing facilities can require years of development and billions of dollars of capital. That is why the European Investment Bank’s discussions with Canada could ultimately prove as important as political declarations. The EIB has said a future framework could allow it to support projects spanning exploration, extraction, processing, recycling and mineral innovation, provided they meet European strategic and environmental requirements.
Europe is confronting the same financing problem at home. Reuters reported in September that 23 developers connected with EU strategic mineral projects had warned about liquidity, financing and permitting difficulties. Canada has attempted to address similar hurdles through public financing tools and international partnerships. Ottawa announced in March that 30 initiatives under the Critical Minerals Production Alliance were expected to help unlock $12.1 billion in project capital with allied partners, taking the broader mobilization effort to $18.5 billion when earlier initiatives were included. The numbers are large, but converting planned investment into producing mines, refineries and reliable export contracts remains the practical challenge.
Regulatory Differences Could Be the Harder Problem
Closer Canada-EU trade does not mean the two economies have identical regulations. Their existing CETA committees continue to work through issues involving environmental rules, cybersecurity, industrial policy, pharmaceuticals and agricultural trade. Canada has, for example, raised questions about European digital-product cybersecurity requirements, while European officials have raised concerns about some Canadian industrial and procurement policies. Those discussions illustrate why deeper integration often involves years of technical negotiations after political leaders agree on broad objectives.
CETA itself provides a reminder. The agreement has operated provisionally since September 2017, but ten EU member states still had not completed national ratification as of 2026. Most commercially important portions remain in force under provisional application, yet the unfinished process shows how difficult comprehensive agreements can be inside a 27-country bloc. The European Parliament has called on the remaining governments to complete ratification before CETA’s tenth anniversary in 2027. Any more ambitious Canada-EU framework will therefore have to balance political enthusiasm with national governments, regulators and industries that may have different priorities.
The October Summit Is the Next Concrete Test
Attention now turns to the Canada-EU summit scheduled for October 29 and 30 in Montréal. Canadian officials have spent months preparing potential deliverables, including work on energy, critical minerals, digital trade and broader economic security. Carney and von der Leyen have also discussed going beyond CETA through a wider “Alliance for the Future,” although the structure and legal meaning of that concept remain unresolved.
A completed digital trade agreement would represent one of the clearest commercial outcomes, although neither side has publicly guaranteed that negotiations will be finished by the summit. Minerals cooperation may arrive through several smaller arrangements—financing mechanisms, stockpiling, purchase commitments, processing investments and individual projects—rather than one sweeping treaty. That distinction will matter when judging what actually changes for Canadian businesses. Canada will remain deeply tied to the United States economically, but a stronger European channel could give miners, technology companies and service exporters something they have historically had less of: meaningful alternatives when access to one dominant market becomes more difficult.
