Canadian Exports Struggle Amid Ongoing US Trade War

Tariffs uncertainty and weaker US demand continue to pressure exports

Canadian exports continue to face challenges as uncertainty from America’s trade war weighs on trade flows and business confidence. Although most Canadian goods comply with the Canada–U.S.–Mexico Agreement and are exempt from higher reciprocal tariffs, export performance has remained weak. 

According to FCC Economics, exports dropped sharply after U.S. tariffs were introduced last April and have not yet returned to previous levels. By the third quarter of last year, non-energy export volumes were still about 11% lower than levels seen before the tariffs took effect. 

Producers of tariffed products such as steel, aluminum, and copper experienced the most immediate impacts. However, exporters of CUSMA-compliant goods were also affected. This includes farm products, fishing outputs, intermediate food goods, and consumer products. These declines suggest that uncertainty and supply chain disruption can hurt exports even when tariffs do not directly apply. 

Figure 1. Trade uncertainty limits recovery in canola exports

Sources: CGC, AAFC, FCC Economics 

The trade outlook remains uncertain as the CUSMA agreement is scheduled for review later this year. A positive outcome is not guaranteed, especially following public statements from U.S. leadership suggesting the agreement could be allowed to expire. This uncertainty continues to discourage business investment and limits exporters’ ability to plan ahead. 

The situation is further complicated by economic conditions in the United States. More than 70% of Canada’s exports are sold into the U.S. market. FCC Economics notes that if U.S. economic growth slows in 2026, as expected, demand for Canadian goods could weaken further. This slowdown would likely affect even exporters whose products remain tariff-free. 

Overall, FCC Economics says Canada’s export sector is facing pressure from multiple directions. Trade policy uncertainty, lower investment confidence, and softer U.S. demand are combining to delay a strong recovery. While exports could bounce back over time, progress will depend heavily on stable trade relations and improved economic conditions south of the border. 

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