{"id":24054,"date":"2026-01-16T22:22:43","date_gmt":"2026-01-16T22:22:43","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&#038;p=24054\/"},"modified":"2026-01-30T19:36:12","modified_gmt":"2026-01-30T19:36:12","slug":"top-risks-2026-a-dependency-trap","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-growth-project\/top-risks-2026-a-dependency-trap\/","title":{"rendered":"Top Risks 2026: A dependency trap"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<p><em>This is a part of RBC Thought Leadership and Eurasia Group&#8217;s <a href=\"https:\/\/www.rbc.com\/en\/thought-leadership\/the-growth-project\/top-risks-2026-canada\/\" data-dig-id=\"LP-24054-10fda2c1\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"joint report\" class=\"rbc-link-format\">joint report<\/a><\/em><\/p>\n\n\n\n<p><strong>Canada is aiming to double non-U.S. exports through two of its biggest trade antagonists, China and India, even as Canadian investment continues to pour into the United States.<\/strong><\/p>\n\n\n\n<p>Since Mark Carney launched his \u201celbows up\u201d campaign to get the country to trade more with the rest of the world, and with each other, Canadians have spent and invested more in the United States, even as Americans are doing less in Canada. The strong U.S. economy, and tax breaks under the Big Beautiful Bill, have reinforced the attractiveness of the world\u2019s largest market for Canadian investors. From pension funds to mutual funds, more Canadian dollars than ever have headed south. Business investment has done the same. Carney may need to do even more on taxes and regulations to keep Canadian investments at home.<\/p>\n\n\n\n<p>For all the bark, and bite, of tariffs, Canadian consumers have been slow to change habits, too. Highly visible brands like Tennessee whiskey were perhaps an easy early target. Florida and Arizona vacations have taken a hit, too. But in large measure, Canadians are still watching Netflix, buying Fords and drinking Coke at the same rate as before the trade war.<\/p>\n\n\n\n<p>A couple of generations ago, in the Trudeau 1 era, when Canada was trying to shift away from a Vietnam-era America, similar tensions reverberated through Canadian living rooms, and board rooms. The proverbial U.S. elephant and Canadian mouse was about more than sneezes and colds; it was about dependencies (plural) in the economy, culture and ultimately sovereignty. A new approach emerged to the binary option of dependence versus independence, known as the Third Option in which Canada would become more closely tied with a reconstructed Europe, a re-emerging Asia and a resurgent Third World.<\/p>\n\n\n\n<p>Back then, there was strong concern about Canada as a branch plant economy\u2014meaning American branch plants. But 50 years on, instead of playing from a position of strength, Canada\u2019s search for new global alliances comes at a moment of maximum dependence on, and maximum uncertainty about, the United States. That dependency has been built over the past century through defence and deterrence partnerships like the North American Aerospace Defense Command (NORAD), trade and investment cooperation and, for Canada, a profile that rested on being the ally most like\u2014but not\u2014America. Now, the central risk is not that Canada will suddenly \u201cbreak\u201d with its neighbour and ally but that attempts to diversify away from U.S. power will expose how little hard leverage Ottawa has with other partners\u2014and how quickly a more transactional White House can weaponize asymmetry in defence, intelligence, and trade. Geography still is destiny.<\/p>\n\n\n\n<p>Canada\u2019s struggle for more independence starts with the economy. The impact of Trump\u2019s tariffs has included the loss off tens of thousands of manufacturing jobs, and body blows to the auto, steel and lumber sectors and regions that depend on them. If those tariffs are sustained, most projections suggest a prolonged period of slow growth for the economy, which will further erode Canada\u2019s relevance on the world stage. The Trump tariffs were felt quickly and deeply, driving down Canada\u2019s overall exports by close to 10% by mid-2025.<\/p>\n\n\n\n<p>Compounding the challenge of dependence, while Canada\u2019s trade deficit with the U.S. is worsening, its investment surplus is growing. The first year of the trade war made Canadians even more keen to invest in the U.S., despite the bourbon boycotts. Canadians injected $61 billion in U.S. securities in the first half of 2025. The country\u2019s biggest pension fund, the Canada Pension Plan, had raised its share of all investments in the U.S. from 35% at the start of the decade to 47% in 2025.<\/p>\n\n\n\n<p>After decades of Canadian exports gravitating to the U.S., business is starting to find opportunities elsewhere. Britain is buying more unwrought gold as investors and central banks look for alternatives to the U.S. dollar. The rest of Europe has been buying more Canadian canola, aluminum, and oil. China is also buying more oil from Canada, thanks to the Trans Mountain pipeline expansion that fuelled an all-time high, in October 2025, of oil shipments outside North America. Even faraway&nbsp;Singapore and Indonesia saw a surge in Canadian sales, from oil to coal to potassium chloride. &nbsp;<\/p>\n\n\n\n<p>Those successes speak to Carney\u2019s pledge to double exports to non-U.S. markets by 2035. To accelerate the early trend, the Carney government is focussed in 2026 on forging closer trade ties with China and India. The federal government also launched consultations on trade talks with several countries, including the United Arab Emirates, Qatar, Saudi Arabia. And the first Carney budget pledged $159 million over three years for trade-financing programs to assist firms trying to enter and grow in new markets. It will need to do a lot more to unglue the infrastructure bottlenecks that have made Canadian ports among the least efficient in the industrialized world.&nbsp;<\/p>\n\n\n\n<p>To gain leverage in more overseas markets, Canada will need to do more to enhance its relevance to those countries\u2014especially in countries and markets, like China, India and even continental Europe, that have a history of hitting Canada with non-tariff trade measures when a point needs to be made. That won\u2019t be easy. As global power has shifted to Asia and as Europe and the Middle East rearm and realign, Canada\u2019s relative salience has eroded. The risk is not outright exclusion from clubs, but quiet marginalization in the working coalitions that matter most for security, technology, and industrial policy\u2014and ultimately trade. Consider Ottawa\u2019s Indo-Pacific Strategy and its deepening security partnership with the Philippines\u2014politically effective, yet not enough to deliver big trade breakthroughs in a region where Japan, Australia, India, and ASEAN states look first to Washington, Beijing, and each other. In Europe, Canada\u2019s big contributions to helping defend Latvia, and a more assertive defence of the Arctic, is buying credibility. Closer to home, in the Caribbean, commitments to helping restore order in Haiti, while important and appreciated, aren\u2019t transforming Canada\u2019s place in the region.&nbsp;<\/p>\n\n\n\n<p>Too often, these allies calibrate their engagement with Canada through the lens of Trump-era conditionality on NATO and trade. Ottawa is seen as tightly bound to U.S. markets and security but slow to invest in capabilities, enforcement, and industrial scale. To carve out a more independent and ambitious role in the world, Canada can build on some of the alliances and networks it\u2019s already part of. Take the Arctic Council, a group of regional players and powers that focuses on soft issues like science and environmental protection. Canada can deepen ties with Scandinavians and perhaps one day re-engage with Russia through those non-military efforts, while also building up military capacity in the region with like-minded allies like Sweden.&nbsp;It cuts to the new (and old) ethos of foreign policy being rooted in interests, not values.<\/p>\n\n\n\n<p>A very different approach could be taken to the Francophonie and Commonwealth, if other members are willing to muscle up, especially with money. In Africa, for instance, where France\u2019s image has deteriorated, Canada can work with francophone partners to strengthen non-military defences against a resurgent ISIS in the Sahel. The Commonwealth can play its own pragmatic role, helping build trade bridges from Australia to India to South Africa while the U.S. doubles down on America First. More military commitments will be needed, too, as the U.S. pulls back from volatile regions and countries. Haiti crystallizes the risk. A Kenya-led mission with UN authority and rising pressure from the Organization of American States gives Canada a chance to be the training and standards hub for Caribbean contributors, focusing on ports, fuel logistics, and basic state functions\u2014and perhaps with difficulty for Canadians to look the other way if the U.S. shows up in the dead of night to take out gangs or shut down migrant rings.<\/p>\n\n\n\n<p>One of the biggest plays for Canada in gaining more leverage may be AUKUS\u2014the security alliance of Australia, U.K. and U.S. The trilateral pact has focussed initially on nuclear submarines\u2014not a Canadian strength\u2014and is now widening its aperture to advanced capabilities, including undersea sensing, low-orbit satellites, and cyber defences, all of which are Canadian strengths. Canada can pitch itself as a serious member for the next stage of the alliance, which would build leverage overseas while also maintaining a respectful and relevant partnership with the U.S.<\/p>\n\n\n\n<p>The year ahead will present plenty of opportunities to explore this sort of <em>realpolitik<\/em> diplomacy, as Canada helps design or join more strategic approaches based on interests more than values, and pragmatism more than principles. This will be a step back from those more idealistic approaches that emerged in that earlier time of Third Options. But as every nation knows, independence has a price.<\/p>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<div class=\"wp-block-columns has-border-color has-grey-border-color is-layout-flex wp-container-core-columns-is-layout-28f84493 wp-block-columns-is-layout-flex\" style=\"border-width:1px\">\n<div class=\"wp-block-column has-border-color has-grey-border-color is-layout-flow wp-block-column-is-layout-flow\" style=\"border-width:1px;flex-basis:33.33%\">\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"572\" height=\"362\" src=\"https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/01\/Top-Risks-2026-Canada-Edition-Download-PDF-EN.jpg?quality=80\" alt=\"\" class=\"wp-image-24114\" srcset=\"https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/01\/Top-Risks-2026-Canada-Edition-Download-PDF-EN.jpg 572w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/01\/Top-Risks-2026-Canada-Edition-Download-PDF-EN.jpg?resize=300,190 300w\" sizes=\"auto, (max-width: 572px) 100vw, 572px\" \/><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:66.66%\">\n<h3 class=\"wp-block-heading mar-t mar-l\" id=\"h-download-the-report\">Download the Report<\/h3>\n\n\n\n<div class=\"wp-block-buttons  mar-l is-layout-flex wp-block-buttons-is-layout-flex\"><div>\n<div class=\"wp-block-button btn before is-style-tertiary tertiary\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2025\/03\/Eurasia-Group-and-RBC-Thought-Leadership-Top-Risks-2026-Canada.pdf\" data-dig-id=\"LP-24054-09519300\" data-dig-category=\"LP\" data-dig-action=\"button click\" data-dig-label=\"Download-https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2025\/03\/Eurasia-Group-and-RBC-Thought-Leadership-Top-Risks-2026-Canada.pdf \">Download<\/a><\/div>\n<\/div><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel mar-t mob-mar-t mar-b mob-mar-b has-rbc-bright-blue-tint-1-background-color has-background\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner pad-t mob-pad-t mob-pad-b pad-b\" style=\"border-radius:0x\">\n<p class=\"mar-b-qtr mob-mar-b-qtr has-white-color has-text-color has-link-color wp-elements-2e93fa86336b7417882d34d73a095595\"><strong>Contributors to the RBC Thought Leadership and Eurasia Group&#8217;s joint report: &nbsp;<\/strong><\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-82c90add5da667172f400ce7d3a0f1cf\"><strong>Gerald M. Butts<\/strong>: Vice Chairman and Senior Advisor, Eurasia Group<\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-69fc2cb9aec1785cf92737c2b9ec3085\"><strong>Graeme Thompson<\/strong>: Senior Analyst\/Global Macro, Eurasia Group<\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-4b9c1f0648eeec1cd72c2f62fdb1635d\"><strong>John Stackhouse:<\/strong> Senior Vice President, RBC Thought Leadership, Office of the CEO<\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-ce6d0c8a2c957a5ba8acc06bab86c8d6\"><strong>John Intini<\/strong>: Senior Director, Editorial, RBC Thought Leadership<\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-0ac321e894a34d673a8664cf1a8585d9\"><strong>Yadullah Hussain<\/strong>: Managing Editor, RBC Thought Leadership<\/p>\n\n\n\n<p class=\"mar-b-0 mob-mar-b-0 has-white-color has-text-color has-link-color wp-elements-6fab05388a0e35e9a2f068d0427afe0f\"><strong>Jackie Pichette<\/strong>: Policy Lead, Skills and Higher Education, RBC Thought Leadership<\/p>\n\n\n\n<p class=\"has-white-color has-text-color has-link-color wp-elements-24d473ecd27e2cb689a907299013856c\"><strong>Shaz Merwat<\/strong>: Policy Lead, Energy, RBC Thought Leadership<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Canada plans to double non-U.S. exports through China and India \u2013 as investment continues to flow into the U.S.<\/p>\n","protected":false},"author":89,"featured_media":24264,"parent":0,"menu_order":0,"template":"","meta":{"_acf_changed":false,"disable_focal_point":false,"featured_image_focal_point":{"x":0.72,"y":0.55},"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"rbc_tl_category":[196],"rbc_tl_tag":[],"class_list":["post-24054","rbc_tl","type-rbc_tl","status-publish","has-post-thumbnail","hentry","rbc_tl_category-the-growth-project"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Top Risks 2026: A dependency trap -<\/title>\n<meta name=\"description\" content=\"Canada plans to double non-U.S. exports through China and India \u2013 as investment continues to flow into the U.S.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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