Canada is only as good as its trade with the US

For decades, Canadian politicians have sold the country as a reliable, rules-based middle power with its own independent economic identity. The pitch is familiar: stable institutions, abundant resources, a skilled workforce, and preferential access to markets from Europe to the Indo-Pacific. In practice, that identity has always rested on a single, overwhelming foundation—the United States.

Roughly seven out of every ten dollars of Canadian merchandise exports still go south. The auto sector, long held up as a Canadian manufacturing success story, makes the dependence even clearer. Japanese companies such as Toyota and Honda now account for the large majority of vehicles assembled in Canada. Those plants exist primarily because of preferential access to the U.S. market under the United States-Mexico-Canada Agreement (USMCA, or CUSMA in Canadian usage). The cars roll off lines in Ontario and are sold overwhelmingly to American consumers. Without that corridor, the economics change overnight.

Canada is attractive in part because it is “a gateway to that big market.”

Japan’s own ambassador to Canada has said as much, repeatedly and without diplomatic varnish. Canada is attractive in part because it is “a gateway to that big market.” Japanese firms structured their North American supply chains around the continental trade deal. High-quality labour and political stability matter, but they are secondary. The decisive factor remains tariff-free or preferential entry into an economy an order of magnitude larger than Canada’s. Private companies, the ambassador noted, “are not doing charity.” They calculate profit. Remove or sharply restrict the U.S. link, and the calculation shifts.

This is not a uniquely Japanese view. European, Korean, and other Asian investors weighing Canada perform the same arithmetic. Swedish firm Volvo Group and South Korea’s Kia have both lobbied Canadian officials to preserve the USMCA framework, citing the need to protect integrated North American production and supplier networks. Access to the continental platform—and especially to U.S. consumers—remains a core part of the investment case for companies from multiple countries. Canadian officials know it. Even as Ottawa talks about diversification and signs new agreements, the baseline selling point to foreign capital continues to include preferential U.S. market access.

Geography matters

Geography makes the dependence structural. Proximity, infrastructure, and decades of supply-chain integration cannot be wished away by trade missions to Asia or Europe. Critical minerals, LNG, and agricultural products offer genuine opportunities to broaden export markets, and Canada has begun to pursue them more seriously. Yet none of those sectors currently approaches the scale or employment intensity of the trade that crosses the southern border every day.

The recent turbulence surrounding the USMCA review and U.S. tariff policy has simply made the underlying reality harder to ignore. When preferential access is called into question, the value proposition of locating production in Canada weakens. That is why Japanese automakers and others have lobbied so consistently for the deal’s preservation. They are not expressing sentimental attachment to Canada; they are protecting the commercial logic that brought them here in the first place.

[Canada’s] attractiveness as a trade and investment partner is tightly bound to the health of its relationship with the United States

None of this means Canada is without agency or assets. It remains a G7 economy with strong institutions, significant natural resources, and growing ties under frameworks such as the CPTPP. Diversification is both prudent and possible. But diversification takes time, capital, and political will measured in decades, not election cycles. In the near term, and in the sectors that still define much of Canada’s industrial base, the country’s attractiveness as a trade and investment partner is tightly bound to the health of its relationship with the United States.

Canada is not merely adjacent to the world’s largest market. For many of the companies that matter most to its manufacturing and export economy, Canada is access to that market. Until that changes in a material way, the country will continue to be only as good as its trade with the US. Canadians are blessed to be beside a powerhouse with similar values, and access to a massive marketplace that other countries wish for. Sadly the hatred towards the United States and/or leadership through fear-mongering, media bias, surreal rhetoric has created a rabid response to Canada’s closest ally, and blurred the reality of how lucky Canada is.

Sources

• Kanji Yamanouchi, Japanese Ambassador to Canada, interview with The Logic, December 2025: “Canada is a gateway to that big market.”
• Ambassador Yamanouchi remarks on CTV’s Question Period and related coverage, early 2026: CUSMA described as “the critical condition” for Japanese auto investment.
• Reuters, “Mark Carney’s trade push collides with reality of US dependence,” June 9, 2026 — notes Japanese, Swedish (Volvo), and South Korean (Kia) carmakers lobbying to maintain USMCA access via Canada.
• Canadian lobbying records and industry statements on Toyota, Honda, Volvo Group, and Kia regarding USMCA/CUSMA preservation (2025–2026).
• Trade data: Statistics Canada / Global Affairs Canada — U.S. consistently accounts for \~70% of Canadian merchandise exports in recent years.
• Trillium Network for Advanced Manufacturing and industry reports on Japanese share of Canadian vehicle assembly (often cited at 75%+ in 2024–2025).