Canada: EU protectionist shift challenges diversification – NBC
National Bank of Canada’s (NBC) Angelo Katsoras argues that Canada’s push to diversify exports away from the United States (US) toward the European Union (EU) faces growing obstacles as EU industrial policy turns more protectionist.
Canada's National Bank of Canada (NBC) economist Angelo Katsoras contends that the country's efforts to diversify away from the United States (US) and towards the European Union (EU) are facing increasing challenges. EU industrial policy has become more protectionist, with procurement rules, subsidies, tariffs and local content requirements favoring European manufacturing.
This trend could prove difficult for Canadian exporters, even with the presence of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). Despite CETA's existence since 2017, the share of Canadian exports to the EU has only risen by one percentage point, from around 4.4% to 5.5%. Much of this growth in 2025 was driven by commodity exports like crude oil, aluminum, and agricultural products, rather than an expansion of manufacturing sector exports.
Canada needs to balance a strong "Buy Canadian" approach domestically and seek new export opportunities abroad without losing favor with key trading partners. Additionally, Canada's small domestic market gives it less leverage in urging local content policies, which tend to be most effective in countries and trading blocs with large domestic markets, like China, the US and the EU.
For Canada, trade diversification beyond the US will likely be tougher than anticipated, requiring adaptation to a global marketplace where market access increasingly depends on local production, supply-chain resilience and economic security.
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