Canada’s strategy to reduce reliance on the United States as the primary gateway for trade and investment is running into a practical constraint: many prospective partners continue to prize Canadian links chiefly for the tariff-free conduit they offer into the U.S. market.
Since winning election in April 2025, Prime Minister Mark Carney has made trade expansion a central plank of his administration’s economic agenda. Carney’s team has conducted four trade missions so far, two of which went to Asia, seeking foreign capital for mining, engineering and infrastructure projects. A fifth mission - the largest to date - is scheduled to visit Japan later this month.
Carney has foregrounded Canada’s preferential access to the U.S. market, noting that more than 85% of bilateral trade remains tariff-free. But officials and industry representatives say that message is not merely rhetorical: the USMCA is often the baseline argument used to attract foreign direct investment.
"That (USMCA deal) has been kind of a baseline of our investment attraction message," a top Canadian government official who requested anonymity to speak frankly said.
USMCA: central to investment decisions
The U.S.-Mexico-Canada Agreement allows products to enter duty-free provided they meet the agreement’s rules on the amount of production carried out within North America. The pact, negotiated during the prior U.S. administration, contains mechanisms that require the three parties to review the deal by the July 1 deadline and decide whether to extend it for another 16 years, renew it on an annual basis for 10 years, or allow a country to quit with six months’ notice.
Talks to renew the agreement are already underway between the United States and Mexico, but it is not clear when Washington will begin formal negotiations with Canada. For companies deciding where to locate production or how to allocate capital, the timing and outcome of any U.S. discussions are a matter of intense interest.
"In different parts of the world everybody wants to know what’s happening with the U.S. because we are just so close proximity-wise," Canada’s Trade Minister Maninder Sidhu said in an interview.
Automotive sector underscores the stake
The motor vehicle industry provides a clear example of why USMCA access matters. Japanese automakers dominate vehicle production in Canada, and lobbying records show Toyota raised the USMCA in 13 of the 14 times it engaged with the government this year. Honda referenced the trade deal in 21 of its 27 contacts with federal officials, citing "the need to ensure protections for North America’s integrated automobile industry and supplier network." Together, Toyota and Honda account for more than 75% of vehicles manufactured in Canada.
Other global manufacturers have made similar appeals. Sweden’s Volvo Group has urged Ottawa to "maintain the USMCA as is," while South Korea’s Kia Corp. warned that changes to the pact could raise costs and cause job losses. Lobbying records list these topics but do not provide further detail on the companies’ strategies.
"For many of the Japanese companies investing here, one of the reasons for their investment is definitely the special access Canada has enjoyed over the long years," said Ishii Hideaki, Minister and Deputy Head of Mission at the Japanese Embassy in Ottawa.
Requests for comment on lobbying from Honda, Volvo and Kia were not answered; Toyota declined to comment on lobbying. Carney’s office referred requests for comment to Canada’s Ministry of Foreign Affairs, which handles trade.
The ministry responded by email, stating: "Strengthening Canada’s longstanding economic partnership with the United States and expanding our trade relationships are mutually reinforcing priorities."
Broader outreach, but limits remain
Under Carney, Canada has sought to diversify partnerships. The government has signed a trade deal with Indonesia, an investment pact with the United Arab Emirates, and is pursuing agreements with the Philippines, Thailand, the Association of Southeast Asian Nations and India, as well as the South American bloc Mercosur, within the year. Ottawa has also reached a more limited trade arrangement with China and is pushing to increase trade with Japan, Vietnam, Pakistan and Bangladesh, according to Trade Minister Sidhu.
Non-U.S. exports reached C$213.8 billion last year, an increase of 16% from the prior year. Government officials indicate they believe Canada could more than double non-U.S. trade over the next decade - contingent on the success of initiatives such as the administration’s trade push with China.
Goldy Hyder, chief executive of the Business Council of Canada, praised government efforts to attract investment in critical minerals and energy but cautioned that location decisions by large investors incorporate more than the domestic investment climate.
"For large investors from Asia or Europe looking at Canada, any decision to deploy capital would necessarily take into account not only our national investment climate but also our connections to the North American continental economy as a whole," Hyder said.
Economic footprint and dependence
Despite efforts to expand other markets, the U.S. remains Canada’s dominant export partner, accounting for nearly 70% of exports, down from 76% a year earlier. Canadian shipments to the United States totaled about C$565 billion last year, with crude oil, motor vehicles and parts, and machinery leading the mix.
Trade Minister Sidhu has included in his pitch to foreign companies both Canada’s free-trade links beyond North America and the advantages of USMCA access. "There’s no choke points when we ship to Asia. So that’s very important for countries around the world, especially with what’s taking place with the Strait of Hormuz," Sidhu said.
Still, several prospective partners see particular value in integrating into North American supply chains by using Canada as a regional node.
"If Canada has established a strong network with other countries or economies, our (free trade agreement) with Canada will definitely be a big boost for our sectors who can take advantage of this ecosystem," Allan Gepty, undersecretary at the Philippines’ Department of Trade and Industry, said.
Regional alternatives and responses
Mexico positions itself, according to its Economic Minister Marcelo Ebrard, as a regional hub for North American production, a factor many global firms weigh as they set up operations. The White House did not respond to a request for comment on the pace and scope of U.S. negotiations related to the trade pact.
While Ottawa pursues expanded ties in Asia, the Middle East and South America, officials and investors interviewed for this analysis emphasize that Canada’s comparative advantage in the near term remains closely linked to the health and predictability of its relationship with the United States. For sectors where cross-border supply chains, tariff rules and regional sourcing requirements matter - notably automotive and energy-related industries - clarity on the future framework governing North American trade is a decisive factor for investment planning.
Carney’s trade agenda is broad and active, from trade missions to new pacts and investment agreements. Yet the evidence from government and industry voices is clear: the gravitational pull of the U.S. market is a central consideration for many multinational investors evaluating Canada as a base for production or export.
($1 = 1.3869 Canadian dollars)