The trade conflict between Canada and the United States is heating up and has moved beyond rhetoric. After the latest round of negotiations failed, the US imposed 50% tariffs on around C$27.6 billion (£14.68 billion) of Canadian goods on August 22. Canada is responding swiftly with dollar-for-dollar retaliation to take effect on September 8.
Two other events in September give this confrontation wider significance. The first is that from September 1 Britain and Canada can trade with each other under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade framework. And on September 17, the Canadian prime minister Mark Carney is due to address the European parliament seeking an ever closer relationship with the EU.
Having sent 75.9% of its merchandise exports to the US as recently as 2024, Canada now sees such close trade integration with its nearest neighbour as a vulnerability, yet it cannot discard the benefits to its economy. This raises a longer-term question: how can Canada reduce its economic dependence on its more powerful neighbour?
Britain has been wrestling with a version of the same question since Brexit. Its experience offers Canada both a warning and, perhaps surprisingly, an opportunity.
There are obvious differences. Britain chose to leave the EU – Canada did not choose the current disruption of its trading neighbour. But both cases demonstrate the same uncomfortable economic reality: we can’t change geography.
Canada’s response has been rapid and has sought to diversify without decoupling. According to the government’s Global Affairs Canada, the share of Canadian goods and services exports going to markets outside the US rose from 29.7% in 2024 to 32.8% in 2025 – its highest level in more than four decades.
Canada’s exports to the EU increased by 16.4% in 2025, with goods exports rising by 23.5%, driven partly by higher crude oil exports.
Statistics Canada estimates that Canadian domestic goods exports to non-US markets rose by C$27.6 billion in 2025, but C$13.5 billion of that impressive growth was led by gold exports to Britain. Even excluding precious metals, non-US merchandise exports still increased by C$14 billion.
When Canadian gold producers increased exports beyond the US, the UK offered a ready alternative: a “friend” with an established global gold-trading infrastructure capable of absorbing them.
This focus on markets able to absorb specific Canadian exports has been a hallmark of Canada’s response to the escalating trade rift with its muscular neighbour. Carney is not simply promoting “middle powers” working together, he is attempting to implement it.
Europe, Britain and the Indo-Pacific offer different channels, allowing Canadian sectors to target whichever market can absorb their exports. So the Carney government’s trade diversification strategy is less about replacing America than building alternatives around it.
Brexit: different circumstances, useful lessons
With Brexit, Britain left a highly integrated, low-friction economic relationship with its largest trading bloc and sought to expand trade elsewhere – where there was considerably more friction.
But geography proved a major barrier to decoupling. In 2015, the EU accounted for 44% of UK exports and 53% of its imports. A decade later, in 2025, those shares were still 41% and 50% respectively. Despite Brexit and Britain’s subsequent efforts to expand trade elsewhere, the geographical concentration of UK trade has not shifted the needle meaningfully.
Nor did the comprehensive US trade deal once envisaged after Brexit materialise: talks began in 2020 but stalled. The subsequent Economic Prosperity Deal offered only sectoral concessions – a reduced-tariff quota for cars, exemptions for aerospace parts, and mutual agricultural quotas.
Canada by contrast, already has 15 free trade agreements covering 51 countries and around 61% of the global economy, including CETA with the EU, CPTPP with major Indo-Pacific economies and existing arrangements with Britain.
Read more: Canada walked away from a U.S. trade deal. What happens now?
Canada’s response to the US dispute therefore looks less like a search for somewhere else to go and more like high-speed crisis management. It aims to protect as much access to US markets as possible while urgently making greater use of alternatives that already exist. That difference in sequencing may matter.
Britain increased friction with its largest market before knowing how much additional trade could realistically be generated elsewhere. Canada is trying to reduce friction elsewhere while resisting increased friction with its largest market.
Canada’s experience shows some success, but economic pain may persist in the short to medium term. Canada’s merchandise trade surplus with the US fell from C$101.3 billion in 2024 to C$81.6 billion in 2025. Its merchandise trade deficit with the world widened from C$7.2 billion in 2024 to C$31.3 billion in 2025.
Yet the wider economy has proved surprisingly resilient. Statistics Canada reported on August 28 that real GDP grew by 0.8% in the second quarter of 2026 after growth of 0.1% in the first quarter.
This does not mean that Canada has defeated economic geography. Around 71.7% of Canada’s merchandise exports still go to the US. But it does suggest that reducing concentration risk may be possible without attempting complete economic decoupling.
Can sharing a king help Canada and UK?
It is not only a king that Canada and the UK share. They share a language and membership of NATO, Five Eyes (the intelligence-sharing agreement between the UK, UK, Australia, New Zealand and Canada), the G7, the G20, while Britain is already Canada’s largest European trading partner. According to UK government figures, trade in goods and services between the two countries rose from £27.6 billion in 2024 to £33.7 billion in 2025.
CPTPP won’t revolutionise bilateral trade overnight, most bilateral goods trade is already tariff-free under the existing agreement. But it opens opportunities in services, investment, government procurement and integrated supply chains across its wider membership.
The lesson from Brexit is not that diversification is impossible. But the UK’s experience tells us that the opportunities presented by alternative markets are unlikely to simply replace the economic advantages of geography.
Canada’s experience so far suggests a different approach. It is aiming to maintain as much access as possible to its dominant neighbouring market while moving as fast as it can to reduce dependence on it.
For Britain and Canada, closer economic relations cannot provide a complete treatment for their respective dependence on the EU and US. But they may provide some pain relief.
