Canada has spent years building one of the broadest networks of free-trade agreements in the world. Yet one uncomfortable fact has barely changed: when Canadian companies look for customers abroad, the United States remains overwhelmingly dominant.
Steve Verheul, the former chief Canadian negotiator for both CUSMA and the Canada-European Union trade agreement, argues that signing still more agreements will not solve that dependence by itself. His new Public Policy Forum report says Canada needs something harder to create than tariff-free access: investment, infrastructure, competitive industries and a commercial system capable of turning diplomatic openings into actual contracts. The warning arrives as Canada is trying to reduce its exposure to an increasingly unpredictable U.S. relationship without damaging the deeply integrated economy that has developed across the border over decades.
Canada Already Has the Trade Deals
Canada’s problem is not a shortage of countries willing to sign trade agreements. The country has 15 active free-trade agreements covering 51 countries and close to two-thirds of global economic output. It is also the only G7 member with comprehensive free-trade access to every other G7 economy. On paper, few advanced economies have a stronger starting position for diversification. That is precisely why Verheul’s argument is significant. If market access alone produced diversification, Canada should already have a much more geographically balanced export economy.
Instead, Verheul argues that agreements open doors without guaranteeing that companies walk through them. A manufacturer still needs customers, financing, distribution partners, regulatory approvals and transportation capacity. An agricultural producer may technically enjoy preferential access to Europe while still facing different food-production standards or processing requirements. A smaller exporter may simply decide that selling into the neighbouring U.S. market is less expensive and less complicated. Trade agreements remove important obstacles, but commercial geography, established relationships and business economics continue to exert enormous influence over where Canadian goods actually go.
The U.S. Share Has Fallen, but Dependence Remains Huge
Recent trade figures show that diversification is possible. They also demonstrate the scale of the challenge. Statistics Canada reported that exports to countries other than the United States reached a record $25.6 billion in July 2026, rising 7.4 per cent from June. Non-U.S. destinations accounted for 33.7 per cent of merchandise exports that month, meaning approximately two-thirds were still destined for the United States. That was a notable change from 2024, when 75.9 per cent of Canadian merchandise exports went south of the border.
The longer-term business structure is even more revealing. Statistics Canada found that 85.7 per cent of Canadian goods-exporting enterprises sold into the United States in 2024. Nearly two-thirds of exporters—65.9 per cent—sold exclusively to the American market. Many were small and medium-sized businesses. That dependence is understandable. A Canadian company near Windsor, Toronto or Montreal can often reach a major American customer by truck far more easily than it can build an entirely new sales, regulatory and logistics network across an ocean. Diversification therefore requires changing business behaviour as much as trade policy.
Decades of Integration Cannot Simply Be Redirected
Canada-U.S. trade is not merely large; much of it represents production systems built jointly across the border. Statistics Canada calculated that $644 billion of the $922 billion in exports originating from Canadian production in 2024 went to the United States. Canadian manufacturers alone shipped $324 billion in goods there, with more than one-quarter of the value of those manufacturing exports reflecting imported U.S. content. In other words, some products classified as Canadian exports are themselves built partly from American inputs.
Automotive manufacturing illustrates why replacing the U.S. market can be especially difficult. Components and unfinished products routinely move between Canadian and American factories as companies build vehicles through integrated continental supply chains. Verheul’s report notes that certain vehicles and components can cross the border repeatedly before final assembly. A Canadian auto-parts producer cannot necessarily respond to U.S. barriers by putting the same component on a ship bound for Europe or Asia. The potential customer, engineering specifications and downstream assembly plants may all be located in the United States. Diversification in sectors like autos therefore means restructuring supply chains, not merely finding a new destination on a map.
Infrastructure May Matter More Than Another Agreement
A trade agreement with an overseas economy has limited value if Canadian producers cannot efficiently move what they sell to a port. Verheul consequently puts trade-enabling infrastructure near the centre of his diversification strategy, calling for a national approach to gateways, corridors, railways, ports and other assets needed to connect Canadian production with global customers.
Ottawa has already moved in this direction. The federal Trade Diversification Corridors Fund has been allocated $5 billion to improve roads, rail connections, airports, bridges, ports and other transportation infrastructure. The broader federal strategy aims to double non-U.S. exports over a decade, adding roughly $300 billion in annual trade by 2035. Projects under consideration have included improvements in the Great Lakes–St. Lawrence region, Western Canadian rail and port capacity and additional infrastructure serving northern and coastal trade routes. These investments matter because transportation economics can decide whether an export opportunity is commercially realistic. A tariff advantage can disappear quickly if congestion, inadequate rail capacity or a long inland journey adds enough cost to each shipment.
Energy Shows Both the Opportunity and the Constraint
Natural resources could be among the fastest areas for meaningful diversification because worldwide demand already exists and Canadian production is substantial. Yet energy also demonstrates how decades of infrastructure investment can lock trade into a particular geography. The Canada Energy Regulator reported that more than 95 per cent of Canadian crude-oil exports went to the United States in 2024. Most existing export pipelines from Western Canada were designed around U.S. destinations, making oil significantly harder to reroute than products that can move easily by container.
New access to tidewater has begun changing the equation, but infrastructure still determines the possible scale of that shift. The same principle applies to liquefied natural gas, critical minerals, potash and other bulk commodities: Canada can negotiate commercial relationships across Europe and Asia, yet those agreements become economically meaningful only when mines, processing facilities, pipelines, rail connections and ports can supply customers competitively. Verheul expects resources to play an especially important early role in diversification for precisely this reason. Reorienting sophisticated manufacturing supply chains can take years, while commodities with established global demand may move into alternative markets more readily if the physical export capacity exists.
Canadian Companies Need Customers, Capital and Follow-Through
Canadian exporters appear increasingly willing to diversify. Export Development Canada reported in September that 72 per cent of exporters surveyed planned to pursue new markets during the next two years, up from 65 per cent only five months earlier. Europe was identified as an attractive destination by 31 per cent, while 20 per cent pointed to Asia-Pacific markets. Those numbers suggest that the appetite for change is no longer confined to policymakers.
Execution remains difficult. EDC has found exporters wrestling with rising business expenses, profitability and cash-flow pressures while also struggling to identify foreign customers, suppliers, partners and distributors. That helps explain Verheul’s emphasis on converting government diplomacy into what businesses would recognize as deal flow. His report supports a stronger Strategic Exports Office capable of tracking opportunities, coordinating financing and diplomatic assistance, and following commercial leads beyond the ceremonial stage of trade missions. A ministerial visit may introduce a Canadian company to a potential customer. Turning that introduction into a recurring multimillion-dollar contract usually requires months of financing, negotiation, regulatory work and local relationship-building after the delegation has returned home.
Competitiveness at Home Becomes Part of Trade Policy
Diversification also becomes much harder when Canadian projects are too expensive, too slow or unable to attract sufficient investment. Verheul therefore argues for a “competitiveness test” when governments make major tax, regulatory and policy decisions affecting export industries. His premise is straightforward: Canadian companies cannot sustainably win distant markets simply because their government negotiated a lower tariff. They ultimately have to compete on price, reliability, technology, quality and delivery.
The report calls for faster execution of major resource and manufacturing projects, better coordination of public and private financing, efficient regulation and meaningful Indigenous economic participation. It also connects international competitiveness with domestic barriers. A country attempting to move goods more efficiently around the world gains little from unnecessary regulatory duplication or restrictions that make commerce within Canada harder than it needs to be. Investment is another part of the equation. Export capacity generally has to be built before it can be sold abroad, whether that means a new mine, processing plant, terminal or advanced manufacturing facility. Trade diversification therefore begins surprisingly far from the negotiating table: with the productivity and investment conditions businesses encounter at home.
Canada Still Cannot Afford to Abandon the U.S. Market
Verheul’s prescription is not economic separation from the United States. He argues almost the opposite. Canada should preserve as much preferential American market access as possible while simultaneously reducing the risks created by relying so heavily on one customer. That two-track approach recognizes economic reality. Even after the unusually strong rise in non-U.S. exports seen in July 2026, the United States still absorbed roughly two-thirds of Canadian merchandise exports.
CUSMA remains critical to that relationship. The agreement remains in force until 2036 even as governments conduct its scheduled review process, and Canadian officials continue to treat preserving predictable North American market access as a central objective. Integrated manufacturing industries have particularly strong reasons to protect it. A sudden disruption to automotive, steel or aluminum supply chains can affect factories and workers on both sides of the border. For Canadian policymakers, the challenge is therefore not choosing between Washington and the rest of the world. It is negotiating enough stability in North America to protect existing industries while avoiding arrangements that prevent Canadian companies from building meaningful relationships elsewhere.
Diversification Is Really a Resilience Strategy
The most important distinction in Verheul’s warning is between diversification and replacement. Canada is unlikely to replace the United States with another single market, nor would doing so solve the underlying vulnerability. Geography, transportation costs, decades of investment and the enormous size of the American economy make the U.S. relationship structurally different from Canada’s trade with Europe or Asia. The practical objective is to ensure that a disruption in Washington does not leave Canadian companies without alternatives.
There are signs of movement. Statistics Canada recorded record non-U.S. merchandise exports in July, while EDC says a large majority of exporters intend to pursue additional markets. Ottawa has committed billions to trade infrastructure and has set a goal of doubling non-U.S. goods and services exports over the coming decade. Yet Verheul’s central warning is that these ambitions will be judged by factories built, ports expanded, buyers found, investments secured and contracts signed—not by the number of agreements announced. Canada already possesses remarkable market access. Its next challenge is turning that theoretical access into an economy capable of using it.
