Canada’s exports to Europe surge, Trump’s tariff war sees trade with the US shrink

In a sign of shifting alliances and rising tensions, Canada’s trade took a sharp turn in March 2025. The country’s exports to the United States dropped suddenly, and at the same time, it increased to other countries. The shake-up came just as tensions between Canada and the US, following President Donald Trump’s policies and statements were heating up, setting the stage for a high-stakes political showdown.

Trade Data Reflects Shifting Dynamics

Canadian exports to the US fell by 6.6 per cent in March compared to the previous month, according to Statistics Canada, marking the most substantial monthly decline in five years. Imports from the US also decreased by 2.9 per cent. This downturn was largely attributed to the implementation of new US tariffs and Canada's countermeasures


On the other hand, exports to countries other than the US experienced a significant uptick, rising by 24.8 per cent, the second-largest monthly increase on record.

Notable increases included crude oil shipments to the Netherlands and Hong Kong, gold exports to Britain, and other items to Germany.

Despite these shifts, Canada's overall merchandise trade exports edged down by 0.2 per cent to $69.9 billion in March, while imports declined by 1.5 per cent to $70.4 billion, resulting in a narrowed trade deficit of $506 million, down from $1.4 billion in February.

At the Port of Montreal, workers observed that they’ve seen a noticeable uptick in cargo headed to Europe and Asia.

Economic Experts Weigh In

Stephen Brown, deputy chief North America economist at Capital Economics, noted that while tariffs impacted trade, strong demand from other countries helped reduce the effects. However, he cautioned that "it is unlikely that exporters can continue to rely on other countries to offset weaker demand from the US.

Nathan Janzen, assistant chief economist at Royal Bank of Canada, emphasized the need for infrastructure investments to support sustained diversification of trade away from the US. He pointed out that "if you wanted to, over time, significantly increase the share of trade going to non-US trading partners, then you need to ship a lot more through ports, which probably requires some significant infrastructure investments for it to be sustainable."

Political Tensions Escalate

Prime Minister Mark Carney met with President Trump at the White House on May 6 to discuss the future of the bilateral trade relationship. The meeting was marked by Trump's provocative suggestion that Canada become the 51st US state, to which Carney replied, "Canada is not for sale."

Trump's remarks, including a claim that the US subsidizes Canada by $200 billion annually, have intensified diplomatic strains, but Carney has vowed to defend Canada's sovereignty and reduce economic dependence on the US.

Economists warn that continued reliance on non-US markets may not be sustainable without significant infrastructure investments and that the broader impact of US tariffs could pose challenges for Canada's economic growth in the coming quarters.