Canada presses on with trade diversification strategy in face of Trump’s threats

OTTAWA — As U.S. President Donald Trump continues to hold out the threat of steep tariffs on Canadian imports, the federal trade minister is citing new trade deals with Ecuador and other nations as proof that its trade diversification strategy is working

Mary Ng told The Canadian Press the free-trade agreement with Ecuador, the sixth-largest economy in South America, is the 16th such deal signed since the government launched its trade diversification push eight years ago.

A lot of the existing trade with Ecuador is agricultural, with the South American nation sending Canada bananas, cocoa beans and seafood, while Canada sends wheat, cereal and lentils.

Statistics Canada says the top products traded between the two nations also include petroleum products, fertilizers and precious metals. Ng said she sees opportunities in services as well.

Canada hasn’t had much luck in talks with its traditional trading partners in recent years. The U.K. walked away from trade talks with Canada last year over access to the cheese market.

Ng said that while she would welcome the U.K. back to the talks, she’s currently focused on expanding trade with other countries.

“Canada welcomes the United Kingdom back at any time they wish to come back to the to the table,” she said.

“But in the meantime, we have concluded an agreement with Indonesia. In the meantime, I’ve launched exploratory discussions with the Philippines. In the meantime, we are at the negotiating table with the ASEAN group of countries and nations.”

Ottawa is in trade talks with the ten nations in the Association of Southeast Asian Nations (ASEAN). It also launched exploratory discussions with the Philippines late last year, around the same time it finalized a comprehensive economic partnership agreement with Indonesia, one of the most populous countries in the world.

Ng said she is considering travelling to Australia and Singapore this month as well.

Boosting trade with ASEAN countries is part of Canada’s Indo-Pacific strategy. But that strategy has encountered turbulence as well.

Trade talks between Canada and India, which had been stop-and-go for about a decade, were abruptly put on ice in the fall of 2023 and have not resumed since.

That rupture happened immediately after Prime Minister Justin Trudeau stood in Parliament to state that his government had “credible allegations” linking agents of the Indian government to the murder of Sikh leader Hardeep Singh Nijjar, who was shot to death in Surrey, B.C. months earlier.

Vina Nadjibulla, Vice-President of Research and Strategy at the Asia Pacific Foundation, said while Canada needs to find a way around the diplomatic crisis with India, all of the concerns Canada has with China didn’t go away just because the bilateral relationship with the U.S. has become more difficult — making these diversification efforts important, even if the economies are smaller.

“There are limits to how much we can do with China, whereas there are no limits with how much we can do with the 11 economies part of the CPTPP, many of which are growing. There are no limits to how much we can do with ASEAN,” she said.

The U.S. has given Canada a month-long reprieve from Trump’s threat to impose steep tariffs in response to what he claims is Canada’s inaction on border security and drug trafficking. But the incoming administration also has indicated there are other major sticking points that will come up down the road.

“Canada, as we spoke about, treats our dairy farmers horribly. That’s got to end,” Howard Lutnick, Trump’s pick for commerce secretary, said at a hearing on Jan. 29. “I’m going to work hard to make sure, as an example, for your dairy farmers — (that) they do much, much better in Canada than they’ve ever done before, and that is a key focus of this administration.”

Ng suggested Ottawa won’t put supply management in the dairy sector on the table with the Trump administration, citing the last major round of trade talks with the U.S. after Trump reopened NAFTA.

“When we negotiated those provisions with respect to dairy and agriculture, they’re a part of a balance of a whole number of things that were negotiated at the time,” she said, adding it was ultimately Trump’s deal. “Agriculture, dairy, supply management was part and parcel of a broader negotiation.”

But the Canada-United States-Mexico Agreement (CUSMA) will be up for review in the summer of 2026.

More than 77 per cent of Canadian exports go to the U.S., and bilateral trade makes up some 60 per cent of Canada’s gross domestic product.

Ng, who has helped spearhead Canada’s approach to the incoming U.S. administration for the past year, said she and Industry Minister François-Philippe Champagne have had upwards of 1,300 meetings with American stakeholders and politicians to send the message that it’s not worth the pain to squeeze Canada with tariffs.

“I keep reminding people that Canada buys more from the United States than Japan, than China, than the United Kingdom combined,” she said. “We are a big customer and tariffs only hurt the American consumer. They hurt them at the grocery stores, at the pumps.”

The Canadian Chamber of Commerce has urged the federal government to press for the elimination of internal trade barriers, now that the trading relationship with the U.S. is under threat.

It estimates internal trade barriers act like a 21 per cent tariff on Canadian goods.

This report by The Canadian Press was first published Feb. 4, 2025.

Kyle Duggan, The Canadian Press