How Canada can crack the diverse India market

Prime Minister Mark Carney arrived in India with clear ambitions to move quickly toward a Canada–India trade agreement. The geopolitical logic is sound, rooted in diversification, Indo-Pacific cooperation, and increasingly aligned strategic interests.

But successive Canadian governments have tried—and largely failed—to unlock India’s massive market at scale. India liberalizes selectively, opening sectors where imports support domestic growth while maintaining tight protection where political sensitivity is highest. Early gains are therefore most likely where India requires external supply or technology—energy security, industrial inputs, and advanced technologies—meaning Canada’s strategy must prioritize sequenced commercial outcomes rather than broad economy-wide concessions.

Luckily, there’s already a blueprint: Canadian pension funds have laid incredible groundwork, having invested over $70 billion in India, which can open up commercial entry points.

We identify some sectors where Canada can make inroads in the Indian market.

Agriculture: Domestic sensitivities, big trade

• Agriculture remains Canada’s largest export sector to India, yet also one of its most politically constrained. Current measures—a 30% duty on Canadian yellow peas and 10% tariffs on lentils—are designed to protect Indian farmers and manage food-price stability.

• India frequently adjusts tariffs, licencing rules, and procurement conditions in ways that effectively cap import volumes, particularly for pulses where Canada is a leading supplier.

• These policies function as domestic economic management tools and can shift quickly with harvest outcomes or inflation pressures, creating persistent uncertainty for Canadian exporters. Clearer import frameworks would help.

Energy: Displacing Russian oil and gas

• India’s energy demand is expanding across oil, gas, and electricity generation faster than any advanced economy, creating structural alignment with Canada’s resource base.

• Yet current trade highlights the gap between potential and reality: Canada’s largest energy export to India today is coal, not oil or natural gas—demonstrating that infrastructure and commercial pathways are limiting the relationship.

• India’s effort to diversify suppliers, notably Russia, under pressure from the U.S., creates an opening for Canada to reposition itself as a longer-term supplier of crude, LNG, and nuclear fuel.

• Long-term oil and LNG purchase orders—not diplomatic announcements—will determine whether alignment translates into sustained export growth.

Nuclear: Powered by cooperation

• India’s planned reactor expansion, targetting roughly 100 GW of capacity by 2047, requires secure fuel supply, while Canada remains one of a limited number of politically reliable uranium exporters.

• Uranium trade operates on long planning horizons and structured supply arrangements, making it less exposed to short-term commodity volatility than most resource trade.

• Cooperation typically extends beyond fuel into engineering services, safety systems, workforce training, and regulatory collaboration that deepen industrial ties over time.

• A uranium agreement would signal that the bilateral reset has moved beyond diplomacy into sustained economic cooperation.

Talent and culture: Soft people power

• Talent mobility and diaspora ties remain foundational infrastructure for the commercial relationship, underpinning investment and business linkages across sectors.

• Pressures surrounding international students and domestic post-secondary capacity mean mobility policies must balance economic opportunity with political sustainability at home.

• Film and media collaboration represents a practical early opportunity, as Bollywood production increasingly seeks global filming locations that “Hollywood North” can provide.

Industries: Beyond commodities

• India’s growth constraints increasingly lie in systems—grids, logistics, emissions management, and industrial efficiency—not simply access to raw materials.

• Canadian firms are competitive in these enabling technologies, allowing Canada to participate as a solutions partner alongside a resource exporter.

• Pairing energy exports with clean technology and digital optimization broadens the relationship beyond commodity cycles and supports incremental, repeatable commercial integration.

Trade with India will advance not through political momentum alone, but by aligning commercial incentives with India’s domestic priorities. Canada’s success will ultimately be measured not by what paper is signed but what follows: goods shipped, projects financed, and supply relationships durable enough to expand over time.

–Thomas Ashcroft, Global Issues Policy Lead

Back to the Future: Lessons from a Post-WWII Tin Agreement

This week, the Office of the U.S. Trade Representative issued a request for comments on how a plurilateral critical minerals agreement should be designed. Buried within the submission is a reference to the 1956 International Tin Agreement. That reference is worth a short history lesson.

Why It Matters

The International Tin Agreement was one of the most ambitious experiments in commodity market governance ever attempted—a producer-consumer framework designed to bring price stability to a material the Western world depended on but couldn’t control. It lasted nearly 30 years but ultimately failed. The reasons it failed are precisely the questions the USTR notice is now asking allied governments to answer for critical minerals.

Lessons learned

• The buyers’ club needs to be big enough to matter. The tin deal failed partly because non-members were significant suppliers. Plurilateral clubs need critical mass—hard to do given China dominates both refined supply and end-use demand.

• Speed matters. Tin took six revisions over decades to lay the ground, and still collapsed. The window for today’s Western critical mineral supply chain realignment is shorter with China likely even more incentivized to further disrupt markets.

• Rules of origin is the real enforcement mechanism. Price floors mean little without teeth, and the buyers’ club needs compliance. Given U.S. desires to reshore production, this reads as a competitive advantage for Canada relative to other U.S. trade partners.

Bigger picture

The critical minerals file is unusual as it’s the only area where Washington is leveraging partnerships rather than tariffs. Convening allies, building frameworks, and even asking trade partners to help design the rules is helping Washington foster greater confidence and investment certainty for industry and financiers.

The architecture is emerging, and if successful, a guaranteed price for metals tied to rules of origin that extend through to refined input should be enough to make Western refining economies work. At present, the capital to build that infrastructure is not. This is where more work needs to be done.

Landing on the eve of the annual Prospectors & Developers Association of Canada conference in Toronto, which attracts more than 27,000 attendees, is RBC Thought Leadership’s newest report,  Mine & Refine, which examines that capital gap—the structures, financing mechanisms, and sovereign investment needed to make Canada a credible supplier of refined critical minerals into the new supply chain order.

–Shaz Merwat, Energy Policy Lead

The week that was

China’s finance ministry confirmed that tariffs on some Canadian agricultural goods will be suspended.

• The announcement follows the deal Carney cut in Beijing earlier this month. 

• While the 100% tariffs on canola meal and peas, and the 25% levy on lobsters and crabs will not be imposed, the announcement made no mention of canola seed tariffs, which were supposed to come down to 15% as of March 1.

Over 900 companies have sued the U.S. government after Supreme Court tariff ruling

• FedEx was the first major American company to come asking for refunds after last Friday’s ruling putting ~$170bn of tariff revenue in play.

• The onslaught of lawsuits that have been filed with the U.S. Court of International Trade will keep lawyers busy for some time and introduce another major layer of uncertainty and difficulty for U.S. President Donald Trump’s tariff regime.

Germany pushes China for a trade reset

• Chancellor Friedrich Merz urged Beijing to curb subsidies, address industrial overcapacity, and ease restrictions on European firms as EU concerns over unfair competition and widening trade imbalances grow.

• Xi Jinping positioned China as a defender of multilateral trade and encouraged closer EU alignment, even as Europe seeks to reduce strategic dependencies in critical supply chains.

–Thomas Ashcroft, Global Issues Policy Lead

Hitting the ground running

Janice Charette has at least two sets of marching orders: the one she received directly this week from Mark Carney, and the one she will receive indirectly next week from Donald Trump.

Trump’s unsurprising loss of the Supreme Court case on tariffs will only deepen the difference.

First to Carney:

• The PM has an impressive depth of respect for his new chief trade negotiator, going back to their days in London but critically to her time last year overseeing his transition team.

• As the country is learning, Carney works with concentric circles of trust and confidence. She’s one of a handful of people in the inner circle.

• The PM is also known to value her deep knowledge of the Canadian government and businesses. She knows where to go for answers to the many questions and challenges the U.S. will throw at her.

• Her first challenge will be to develop the framework for a marathon of trade talks. 

• That includes structuring technical conversations with a counterpart that’s neither interested nor prepared right now.

• And it means building up a team for the fight. In Trump 1, the Trudeau team set up a war room that built a network of influencers, including in industry and state governments. Something similar is needed now, but perhaps more of a data room—an operation that can gather and disseminate current information on the impact of tariffs in both countries. 

• Her next challenge will be to align with the PM on the potential gives and red lines that any negotiator needs in their pocket.

• One non-negotiable along the way: ensure the CUSMA exemption is maintained.

Now to Trump:

• The President, who is also on a war footing with Iran, will spend the weekend also ramping up his next trade battle.

• Many are expecting more Section 301 tariffs to replace the emergency powers tariffs that the Supreme Court struck down. Expect more non-tariff measures, too, and more threats

• His key messaging may come in his State of the Union address Tuesday night, which is supposed to speak to affordability but will likely toggle between geopolitical conflicts and tariffs. 

• The setting, on Capitol Hill, won’t be lost on a President who will cajole Congress to support him on both war fronts.

• Trump’s lead negotiator, Jamieson Greer, has told people privately he’s preparing for negotiations with both Canada and Mexico to run beyond the November midterms. 

• That flies in the face of many expectations for a replay of 2018, when the administration worked rapidly through the summer to complete what the President could present in the fall campaign as a BDE (best deal ever).

• If that happens, a Democrat-led House would likely make any comprehensive deal with either country an improbability. Not only will the Dems want a different deal than Trump, Congress will be consumed—almost Watergate-like—with the Epstein files. 

Charette has faced plenty of such challenges in her career, and is widely known for grace under fire.

Press play on the next big test.

– John Stackhouse

What the supreme court ruling means for Canada–and what’s next

A tariff backdoor just closed

• The U.S. Supreme Court has effectively removed the International Emergency Economics Power Act (IEEPA) as a usable, fast-tariff instrument for any president: the ruling says IEEPA’s authority to regulate importation does not include the authority to impose tariffs absent explicit Congressional authorization.

• That matters because IEEPA was the administration’s most flexible mechanism: it enabled broad, rapidly adjustable, country-wide duties (including “reciprocal” tariffs and fentanyl-related tariffs) that could be turned up or down quickly as negotiating pressure.

• A large share of tariff collections tied to IEEPA is now legally exposed (and at minimum, frozen as a durable policy tool).

• For Canada, the ruling does not touch the most biting tariffs: sectoral/national security tools (notably Section 232) remain the active battlefield for steel, aluminum, autos and other targeted categories.

• RBC Economics hammers home that point in ‘Preserving CUSMA exemptions: Canada’s real priority amid U.S. IEEPA ruling.’“By our count, 89% of Canadian exports to the U.S. in December were not charged with tariffs because they’re compliant with rules of origin requirements in CUSMA. That leaves IEEPA measures only effective on less than 5% of exports to the U.S. In December (with the remainder accounted for by Section 232 tariffs), Canada faced an average effective U.S. tariff of 3.1%—the lowest of all major U.S. trade partners.

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Canada: less blanket risk, key sectors remain exposed

• The ruling weakens Washington’s negotiating power by removing the credibility of instantaneous escalation. Future tariffs must pass through investigations, evidentiary standards, and consultation.

• Industries exposed to higher input costs, retailers sensitive to consumer prices, vulnerable agricultural exporters, and opposed politicians will have more opportunity to intervene before tariffs take effect.

• The economic pain of 232 tariffs remains but the credibility of economy-wide escalation declines, improving predictability—a meaningful advantage for negotiations and investment decisions tied to North American supply chains.

• Integration becomes a stronger argument. When tariffs require justification through formal investigations, deeply embedded cross-border supply chains become evidence against disruption.

Expect tariffs to persist, but with more politics attached

• The administration will try to rebuild tariff leverage using other statutes, but those tools require more process, justification and time.

• Canada can treat this as an opening to shape the record, not as an off-ramp from tariff risk. If the battlefield shifts toward investigations and consultations, Canada will need to make the case that tariffs are self-defeating for the U.S.

Coalition-building becomes more decisive

• The most effective counterweight to new tariffs will often be U.S. stakeholders with skin in the game: downstream manufacturers, retailers, farmers, state governments, and industry associations that can credibly argue costs, shortages, and lost competitiveness.

• Canada’s best outcomes will come from identifying where U.S. dependence is highest (inputs, components, energy-intensive processing, regional supply chains) and turning those into politically legible arguments.

What we’ll be watching closely going forward

1. Which alternative tools the Trump administration prioritizes, and whether it doubles down on using Section 232 tariffs.

2. Whether the White House seeks negotiated “wins” that substitute for tariffs: procurement commitments, investment announcements, or sectoral carve-outs.

3. How quickly and effectively U.S. industry groups and state actors coalesce around this momentum swing to further curtail White House trade power.

4. The legal and fiscal ramifications. The court did not decide whether revenues collected under IEEPA must be returned, leaving potentially US$175 billion subject to litigation. Pressure to issue large-scale repayments will be vehemently opposed but will reinforce opposition, potentially induce fiscal pressure, and complicate any attempts to rebuild a similar tariff regime.

— Thomas Ashcroft

Also in this edition: What the future could hold for Canada’s auto industry

Locked out of the Vault

Agreements from Washington’s inaugural Critical Minerals Ministerial are still being digested, which saw bilateral frameworks with over a dozen trade partners and the unveiling of Project Vault.

Notably, Canada wasn’t among the signatories. So as America rewires the global minerals order, does Canada stand to gain or be left behind?

Why It Matters

Project Vault is America’s attempt to build a Strategic Petroleum Reserve for critical minerals. The problem: the SPR analogy breaks down in a way that matters enormously for Canada.

The original SPR worked because the U.S. had vast domestic refining capacity—stored crude to be converted into refined fuels along the Gulf Coast. Today, North America has almost none of the processing infrastructure needed to convert raw critical minerals into the refined compounds that defense, semiconductors, and EVs ultimately require.

So Project Vault faces a fundamental paradox: stockpile raw ore with no capacity to process it; stockpile refined material almost certainly bought from China—the very dependency the U.S. is trying to hedge.

By the Numbers

• US$15 billion—EXIM Bank financing already mobilized across allied minerals projects globally, before Project Vault

• US$12 billion—Project Vault financing (US$10 billion from the U.S. Export-Import Bank and US$2 billion in private capital)

• 60-day supply target buffer for strategic minerals

• 15 bilateral frameworks signed this week alone—including the EU, Japan, UAE.

• China’s refining grip—98% gallium, 91% rare earth magnets, 96% battery-grade graphite, 79% cobalt

• Canada’s position—71% of U.S. unwrought aluminum imports; Quebec’s Vaudreuil refinery is one of only two alumina refineries left in North America.

• Project Vault covers all 60 critical minerals on the USGS list, many of which are core economic exports for Canada

The Bigger Picture

The U.S. isn’t building a multilateral framework—the word chosen deliberately at the ministerial was plurilateral. A smaller, aligned coalition setting its own rules, coordinating price floors, and directing investment collectively. Through EXIM and Project Vault, this architecture is being built in real-time.

Energy-intensive refining and smelting, the very processes needed to turn minerals reserve into usable industrial inputs, on paper at least, is a good set up for Canada. Our clean and cost competitive power (hydro, nuclear) complements existing mineral deposits, which, with integrated rail networks, allow for better full-cycle economics than stand-alone processing and refining operations.

Bottom Line

Canada’s critical minerals endowment is arguably its most important bilateral tool heading into the CUSMA renegotiation. Its broader integration into U.S. supply chains—across aluminum, copper, nickel, zinc and manganese— limits being phased-out to a large extent. If Canada can secure explicit recognition of Canadian content in U.S. value chains, via CUSMA assisted by Project Vault’s predictive offtake and access to U.S. capital, it is a clear win.

That said, our minerals chip depreciates with each passing day. Every bilateral framework Washington signs with another partner narrows Canada’s relative leverage, especially if CUSMA negotiations extend into 2027. And at a time when investment decisions at times are less about economics and more a price of admission to the U.S. market (read: Korea Zinc JV).

Threading that needle will be the challenge.

– Shaz Merwat

Car trouble ahead?

RBC economist Farhad Pananov was at The Globe and Mail’s Future of Automotive event this week. Here’s some of what he heard:

• Strategic investments in the auto sector have fallen off compared to just to a few years ago when manufacturers were setting long-term pivots.

• While panelists heaped plenty of praise on Canada’s highly skilled and educated labour force and diversified local economies, it was clear what the country’s greatest advantage is access to the second largest auto market in the world. For now, at least.

• The Canada-China EV deal, which will facilitate the import of 49,000 Chinese EVs a year at low tariff rates, was met with skepticism in the room: Which brands will come to Canada? Will Canadians actually buy them?

The answer to that last question could all come down to the price…

Trade Posts

U.S. lawmakers rebuke Trump’s Canada tariffs 

• The U.S. House of Representatives voted to rescind tariffs on Canadian goods, the same week President Trump threatened to block the opening of the Gordie Howe International Bridge because of trade disputes. 

• While the President will likely veto the motion, Wednesday’s vote was backed by six Republicans, indicating growing discontent with Trump’s trade policies and threats. 

U.S. agriculture industry lobbies for CUSMA continuation

• Over 40 U.S. agricultural groups have formed a coalition to support the Canada-U.S.-Mexico trade agreement, emphasizing the economic benefits it brings to rural communities and American farmlands.

• The advocacy campaign is targeting members of Congress, the White House, and the President, with economic analysis that shows Canada and Mexico account for approximately one-third of the value of U.S. agricultural exports. 

U.K. government signals closer alignment with Europe

• Chancellor Rachel Reeves announced the U.K. is prepared to unilaterally align with the EU’s single market rules in sectors like financial services to reduce trade barriers, describing closer integration with the EU as the “biggest prize” for U.K. growth, pivoting away from prioritizing non-European trade deals.

• The Labour government has been reticent to reopen Brexit as a political issue but are beginning to look more fondly at closer integration with the EU as they search for ways to boost economic growth. 

— Thomas Ashcroft

Also in this edition: Canada’s trade with non-U.S. markets is hitting all-time highs and the U.S. looks to create a critical minerals trading bloc to rival China

Ottawa’s Big Wheel Deal

The Liberal government’s much-anticipated auto-sector strategy reinstates electric vehicle incentives, eliminates EV sales mandates, invests in expanding the EV charging network, and offers incentives and tax breaks for global auto makers to build in the country.

It’s all in response to U.S. tariffs, and the looming threat that President Donald Trump might tear up CUSMA in the coming months.

Of course, Prime Minister Mark Carney is hoping to preserve CUSMA and build on its North American supply chain advantages to a new set of investors. But even if Canada’s access to the U.S. market is no longer unfettered, Ottawa can point to several reasons why European and Asian countries may want to set up their auto shop in Canada:

• Canadians buy a lot of pricey cars and SUVs: Canada is the world’s 9th-largest auto market, with ~1.9 million vehicles sold annually—skewed toward higher-value SUVs and trucks, with a robust servicing and after-market (courtesy of our harsh winters). OEMs also now compete for high-margin customers, not volume. Canadians buy a lot of cars, including a lot of expensive (read: high margin) cars.

• Asian carmakers want a North American hub: With 7.2 million global sales in 2024, the combined Korean power of Hyundai-Kia edged out GM and Stellantis for the third spot in the global rankings. However, the companies’ manufacturing footprint and market share remains Asia-heavy, creating an incentive to rebalance toward North America. Canada could become a second North American production zone, hedging geopolitical, climate, and labour risks.

• Canada is critical to global supply chains: Our store of critical minerals (nickel, cobalt, lithium, graphite), batteries, parts ecosystem, and reliable, clean power offer supply chain integrity at low cost. Just ask Volkswagen.

• The Ontario-Quebec corridor is an auto-tech Silicon Valley: Canada’s strengths in AI, autonomy, and software—the frontier of future value creation for the auto industry—further enhances the offering.

• Canada is a free-trade haven: It stands to reason that Canada will secure some form of market access to the U.S. that makes an auto trade possible. We shouldn’t forget the 14 other free trade agreements we’ve signed that cover 50+ countries, 1.5 billion consumers, and 60% of global GDP.

— Jordan Brennan

Look What’s Trending

According to RBC Economist Claire Fan:

“Despite the deteriorating trade balance, Canadian exporters continue to show signs of partial diversification into non-U.S. markets. Goods exports to non-U.S. destinations were 29% above year-ago levels in November, while goods imports from non-U.S. markets rose 18%—both near or at all-time highs.”

Trade Posts

U.S. looks to create a critical minerals trading bloc rivalling China

• At a Washington summit, attended by representatives from more than 50 nations, the U.S. outlined a vision for a rare earths trade zone, using tariffs to create a price floor for minerals and drawing on the respective strengths of partner countries across the value chain, to counter Chinese dominance.

• Several bilateral deals were struck, including U.S. “Action Plans” with Mexico, the EU and Japan, to develop coordinated trade policies.

• Foreign Minister Anita Anand said more details were needed before agreeing to such a framework, which would play a role and potentially give Canada some leverage in upcoming CUSMA negotiations.  

Trump and Modi broker trade truce

• Washington committed to cutting tariffs on Indian goods from 50% to 18%, in return for New Delhi stopping its purchases of Russian oil.

• While details on the timing of the tariff changes and other trade barrier reductions remain vague, the amelioration of some of Trump’s most punitive tariffs gave a boost to U.S.-listed shares of Indian companies.

Red Sea reopening adds to shipping overcapacity pressures

• As Houthi attacks on the critical shipping lane subside, and Suez Canal transit rises, container companies are bracing for pressures on their bottom line if freight rates lower and oversupply worsens.

• Danish group AP Møller-Maersk, the world’s second largest container shipping company, announced its first operating loss in years and plans to cut jobs to insulate these impacts.

• Naval escorts have become a necessity for container ships passing through the Red Sea, and tensions between Iran, the U.S. and Israel remain a threat to the stability of the passage.

Ottawa indicates foreign aid will be increasingly tied to trade objectives

• Randeep Sarai, Secretary of State for International Development, said Canada’s development and humanitarian spending will focus more on opportunities that create “mutual prosperity.”

• As it reduces the foreign aid budget, the government will look to use the distribution of these dollars as a tool with countries that Canada wants to increase trade with.

— Thomas Ashcroft

Also in this edition: Tariff lawsuits ramp up, Canada-India relations are re-energized, and two economic giants strike the “mother of all trade deals.”

Getting our house in order

On the same day the International Monetary Fund released a report showing that the removal of internal trade barriers in Canada could result in a 7% boost in real GDP, an important discussion took place at the Canadian Club of Toronto.

Two of Canada’s top CEOs—Tracy Robinson of CN Rail and Max Koeune of McCain Foods—joined Sean Strickland of Canada’s Building Trades Unions for a discussion with the Business Council of Canada’s Goldy Hyder, on the big changes that Canada needs to make to infrastructure development, business regulation and immigration.

Here are some bottlenecks we need to fix—quickly:

• Canada is among the worst in the OECD in days lost to labour disruptions. That means our connective tissue to the world—ports, rail, sea lanes—are MIA when the rest of the world is expecting us to be on time.

• The TMX oil pipeline expansion took longer to permit than to build. Just one of many agonizing stories about our glacial speed of permitting and other approvals.

• Despite massive shortages in the skilled trades, our provinces are bringing in paltry numbers through immigration. Who else is going to build all those big projects?

• It’s easier regulation-wise to export food to the U.S. than between provinces. When will we get to the one economy idea?

What needs to be done?

Robinson said we need to review our approach to labour negotiations to ensure the economy doesn’t get shut down as often as it does, especially in a world when other countries are happy to see that happen.

Strickland pushed for better labour force planning, to ensure we’re recruiting the right people and right numbers for the right needs in our economy. We’ve talked about that for years. It’s solvable.

Koeune called for immigration reforms that would give permanent residency applicants a clearer view of how long it will take, and where their application is at. He called the system a “black box,” which I’ve heard from plenty of other employers in recent months.

We can’t take on the world if we don’t take on our own challenges first.

Elbows up, fine. Heads up, better.

–John Stackhouse

Look what’s trending…

Since the Supreme Court’s November 5^th hearing on the legality of U.S. tariffs, more than 1,000 companies, including Costco, Revlon and Ray-Ban, have sued the Donald Trump administration. The reason? If the highest court in the land strikes down the tariffs (verdict date unknown), the suitors hope to recoup some of the money they allege has been lost due to tariffs.

Trade posts

Record Canadian oil output finds new markets

• Despite weak global prices, Canada’s oil industry is pumping record volumes and boosting exports to Asian markets, particularly China where sales more than quadrupled last year, as well as India and South Korea.  

• Though most Canada’s oil exports still go to the U.S., the sector’s resilience, record output driven by expanded pipeline capacity, and growth in Asian markets, is boosting oil majors’ shares and strengthening the country’s economic diversification drive. Expect more calls for additional pipeline capacity, to sustain this trend.

Canada-India pursue apolitical, reliable energy trade

• As diplomatic relations continue to improve, officials pledged that Canada would supply more crude oil, liquefied natural gas, and liquefied petroleum gas to India, and that more refined petroleum products will be sent the other way.

• Energy minister Tim Hodgson noted that India represents the fastest-growing source of energy demand while assuring his counterparts “we will never use our energy for coercion.” The relaunch of a “ministerial energy dialogue” between Canada and India promises to facilitate greater reciprocal investment and collaboration in other areas including hydrogen, uranium, biofuels, batter storage, critical minerals, electricity, and AI.   

• India’s High Commissioner to Canada said Prime Minister Carney will likely visit India in March, and that under his government no longer views Canada as the “younger brother” of the U.S.

India and EU agree “mother of all trade deals”

• As Washington targets both with steep tariffs, two of the world’s biggest markets have agreed a trade deal that,  once in effect, will eliminate tariffs on more than 90% of goods, marking a new era in economic relations.

• The two sides made no secret of the fact this breakthrough was catalyzed by U.S. trade policy, to soften the blow of tariffs and increase their economic autonomy. This will result in boosts to India’s export of manufactured goods and give the EU preferential access to a massive, growing market.

• The EU is already one of India’s largest trading partners, and while India is only the EU’s ninth-trading partner, the EU predicts its exports there to double by 2032. Negotiations over an Investment Protection Agreement are ongoing.

–Thomas Ashcroft

How the math is changing

To judge by Davos’s main promenade, globalization is alive and well. Yes, the U.S. took over a church and shop to celebrate America First. But there were far more storefronts promoting Brazil, Indonesia, the Philippines and Nigeria. India wrapped an entire hotel on the promenade, where thousands schlepped every morning from their crash pads to the Congress Centre, and back at night from dinners and nightcaps.

Is this a false spring, just like the mild week in Davos? Or the beginning of what Christine Lagarde called “Plan B” and a more diversified global economy?

The European Central Bank president told the closing session of the World Economic Forum that she “is not on the same page” as Mark Carney’s view of a global rupture—but does see an important diversification of trade underway.

According to the WEF’s own research, close to half of global growth over the next five years (2025-30) will come from Asia, with China accounting for 23% and India another 15%, while the U.S. will produce 11%. Combined, the G7 will account for only 18.5% of growth. 

If it feels like a new age of diversification, one should never forget the gravitational pull of the two economic superpowers, which over the past decade (and longer) have consumed much of the world’s capital and trade. Case in point: China now accounts for about 40% of published studies on drug research, while Europe’s share has dropped from 20% to 12%. Guess where most of the world’s drugs will come from in the 2030s.

With so much in flux, who will dominate the world’s future trade zones? I came away from Davos thinking three forces will help shape the answer:

1. Balance-sheet strength. We may be on the verge of some heavy government (and perhaps private sector) borrowing to underwrite all that’s needed for diversification—from new supply chains to infrastructure. Points to the U.S. for owning the world’s reserve currency, but a range of middle powers—Germany and Canada, among them—can borrow plenty on their own.

2. Artificial Intelligence. It’s sucking up much of the world’s private capital, and will determine a lot of trade outcomes as it (along with robotics) transforms production. Yes, the U.S. and China dominate, but if AI becomes available to all, like the Internet, advantage will go to those with energy to power all those learning algorithms and the entrepreneurial brains to put the results to work. The eight biggest U.S. tech companies have $18 trillion of equity value to leverage—and a lot more domestic energy than China or Europe.

3. Demographics. It’s the sleeper trend, as the West (and Far East) tumble over demographic cliffs. Even in an age of AI, trade still relies on humans to help make and ship things and humans to buy those things. Africa’s population is on course to hit 2.5 billion by 2050, when it will be home to 25% of the world’s working age population. 

Some shrewd advice I heard was for companies to think country, supplier and currency—and have an option for each. Call it a matrix of Plan Bs. Or what Carney termed “variable geometry.” 

It’s the new math.

— John Stackhouse

The week that was

Bank of Canada Q4 survey shows Canadian businesses continue to be negatively impacted by trade tensions, but some are increasing non-U.S. exports

• 33% of Canadian firms reported they are strongly impacted by U.S. trade policies. A small but increasing share of businesses reported higher sales to non-US markets. Despite weaker sales to U.S. customers, most exporters to the U.S. have not diversified into other markets citing barriers like investment in specialized equipment, compliance with regulatory requirements, and transportation costs.

• This signals, albeit modestly, that Canadian firms are willing to expand in other markets. However, immediate economic pressures are significantly constraining hiring, investment, and diversification efforts.

Canada agrees to new partnership with Qatar to cooperate on trade, investment, and defence

• Canada and Qatar agreed to conclude FIPA negotiations, signed an MoU to establish a Joint Economic Committee (JEC), expand air services, and increase defence collaboration (including more exports from Canada’s defence sector).

• This is the latest in a series of wins, following last week’s agreement with China, for the Canadian government’s diversification efforts. The value of merchandise trade between Canada and Qatar in 2024 was $325 million, leaving lots of room for growth.

European lawmakers delay Mercosur trade pact over legal concerns

• EU ratification of this agreement, decades in the making, with South American economies has been postponed by lawmakers seeking an opinion from the European Court of Justice.

• This is the latest hurdle in a protracted process, following pressure from European farmers, which could delay the trade pact by a further two years. However, German Chancellor Friedrich Merz called on the European Commission to provisionally apply the deal, which would create one of the world’s largest free-trade zones, covering over 700 million people, and ~20% of global GDP, in recognition of the current “geopolitical situation.”

 First Chinese order of Canadian canola in months comes following trade mission

• Prime Minister Mark Carney’s visit to Beijing has led to a Chinese importer buying 60,000 metric tons of Canadian canola, the first cargo order of its kind since China halted imports in October. This comes as China is expected to lower tariffs on Canadian canola to 15%. Canadian agriculture minister Heath MacDonald encouraged Chinese investment in Canada’s agri-food sector this week, highlighting the potential for collaboration in domestic value-added processing and research.

• Saskatchewan, Canada’s biggest canola-producing province and the province with the highest year-over-year growth in wholesale trade, is especially well positioned to capitalize. Premier Scott Moe (who was on the trip to China) has emphasized the benefits for his province and Canada’s agricultural industry more broadly.   

— Thomas Ashcroft

Canada plans to allow 49,000 made-in-China EVs at much lower tariffs in return for easing levies on Canadian agricultural products. Here is what you need to know about the deal and its implications:

• About half of the vehicles imported from China are expected to cost less than $35,000 by 2030. Average EV purchase price in Canada in 2024-25 was around $67,000.

• Canadian EV sales were projected to remain largely flat in 2026 following a 30% decline last year. To size up Chinese imports, 49,000 would represent a quarter of Canada’s annual EV market. Ontario Premier Doug Ford is worried it could impact sales—and jobs—from existing manufacturers.

• Europe’s strategy could serve as an alternative roadmap for Canada on autos: The continent worked with Chinese carmakers to level the playing field, and set targeted tariffs aimed at offsetting the impact of subsidies. Even with that, however, Chinese brands have captured 10-15% of the EV segment in Europe.

• The Canada-China thaw comes ahead of critical CUSMA renegotiations that could disrupt the 80% of Canadian exports that enter the U.S. market tariff-free. Could it further complicate U.S.-Canada negotiations?

— Farhad Panahov

What’s in store for Carney & Canada in 2026?

By John Stackhouse

Tariffs don’t take a holiday and we can assume President Donald Trump won’t either.

Trump used his decorative holiday message to the nation this week to portray himself as a Santa Claus of trade:

• Tariffs are one of his great achievements, saying it is bringing record investment to the U.S.

• Tariffs will help pay for the “warrior dividend” to 1.45 million U.S. military personnel.

• Tariffs are leading to lower prices.

We will see later in 2026 (hello, midterms) if Americans agree. But expect the President to charge into 2026 on a tariff high, even if, as expected, the Supreme Court rules that he’s overstepped his powers. How? The White House can quickly rebuild the tariff wall, using Section 122 and 301 powers that would keep tariffs in place, although the expected rate might drop from the current 16% average to perhaps 10%.

Three questions for the New Year:

• Will countries look to retaliate, even with non-tariff barriers?

• Can Congress afford to pass tax cuts and tariff cuts?

• Can Canada afford to play for time?

Mark Carney seems resigned to the “no deal” scenario, and with it a long slog for CUSMA negotiations. The biggest near-term challenges will be around digital services, lumber and rules of origin for auto manufacturers, each with its own economic and political calculus:

• expect the U.S. to continue to push for more concessions for online media, particularly for Meta, which could face blowback in Quebec where cultural protections (including subsidies for local media) will be a red line for an expected Parti Quebecois government in 2026;

• expect the U.S., facing a soft housing market, to continue to hammer B.C. (and New Brunswick) with softwood lumber measures;

• expect Doug Ford to push hard again for favourable access to the U.S. auto market for Ontario assembly plants. 

Canada is not likely to get all three. Which means Carney may spend the holidays thinking through the coal that Santa has in mind for 2026. 

25 numbers that defined ’25

14257: The Executive Order signed by U.S. President Donald Trump on April 2 that imposed a 10% baseline tariff on imports from all U.S. trading partners.

90: Countries slapped with a tariff rate above the baseline 10% on “Liberation Day.”

2: White House visits by Prime Minister Mark Carney. The most recent was in early October during which Trump called Carney a “good man” who is doing “a great job.”

75 million: Dollars spent by Doug Ford’s Ontario government on an anti-tariff ad campaign featuring Ronald Reagan, which prompted Trump to call off negotiations with Canada. Ford claims the ad clocked 12.4 billion views.

US$35 trillion: Estimated value of global goods trade in 2025. Trade volumes hit record highs even as geopolitics fractured supply chains—proof that globalization is rewiring, not retreating.

50,000: Fewer manufacturing jobs in the U.S. since the start of the year.

US$1 trillion: China’s record trade surplus despite tensions with the U.S. Beijing exported US$3.4 trillion worth of goods in the first 11 months of the year by finding, in part, new markets, including Africa (+26%), Southeast Asia (+14%) and Latin America (+7.1%).

5: The industries that accounted for 80%of tariffs the U.S. collected from Canada, namely auto (28.8%), aluminum (23.3%), iron and steel (12.7%), machinery (8.8%), articles of iron and steel (8.3%).

$70 billion: The United Arab Emirates’ investment pledge for Canada, focused on the development of critical minerals, energy, ports and AI.

US$226.4 billion: U.S. exports to Mexico between January and August—surpassing the US$225.6 billion goods shipped to Canada—marking the first time in 30 years Mexico overtook Canada as a top destinations for exports.

$200 billion: The estimated value of the Canadian Mutual Recognition Agreement, which eliminates all barriers to trading goods (except food) between Canadian provinces and territories.

3x: Increase in global trade-restrictive measures since 2019. Tariffs, export controls, and subsidies are now structural features of trade policy—not temporary shocks.

10%: The amount of lumber exports  (enough to build 75,000 homes) that Canada’s forestry industry is planning to re-route from the U.S. to the U.K. and Europe.

100%: U.S. reliance on imports for 16 critical minerals (including graphite), with more than 50% import dependence for another 29, including zinc, cobalt, and nickel.

$600 billion: Canada’s non-U.S. export goal by 2035, as outlined in the 2025 federal budget–doubling the current amount.

$50 billion: The potential value of a trade partnership between Canada and India, which have renewed relations this year.

$100 billion: The annual value of Canada’s agri-food exports. Roughly 60% was destined for U.S. markets.

$994.63: The amount the average family in Canada can expect to pay more in groceries in 2026, compared to 2025. The toll of tariffs is impacting domestic food security, with one in four Canadians experiencing food insecurity.

86: Percentage of goods the U.S. imported from Canada in September that were duty free.

51: Number of days gold prices closed higher than previous all-time highs due to heightened geo-economic uncertainty.

28%: The increase in coffee prices year-over-year.

19%: Decline in Chinese exports to the U.S. this year.

US$244 billion: Total tariff revenues the U.S. has collected (January to November 2025)

1 million bpd: The potential capacity of a West Coast oil export pipeline at the heart of an MoU between the federal government and Alberta that would expand Alberta’s oil exports to Asia.

US$7 billion: The massive hit Michigan’s Big Three automakers—General Motors, Ford and Stellantis—expect on their earnings in 2025 from U.S. tariffs.