Canada has recorded stronger-than-expected economic growth in the third quarter, as Prime Minister Mark Carney’s government looks beyond the US to forge new trade policies and partnerships.
The economy grew at an annualised rate of 2.6% in the third quarter, boosted by a strengthening trade balance as imports fell and exports edged up, according to the latest data from Statistics Canada.
The growth helped Canada avoid a technical recession, with exports of goods and services rising by 0.2%, a slight increase from the “significant” 7% drop in the second quarter, Statistics Canada said. Imports of goods and services fell by 2.2%, marking the biggest drop since the fourth quarter of 2022, it added.
“The increase [in exports] in the third quarter was led by higher exports of crude oil and crude bitumen, followed by commercial services,” Statistics Canada said.
The stronger trade balance comes amid rising tensions between Canada and the US following President Donald Trump’s decision in October to suspend trade negotiations between the two countries in response to a TV advertisement released by Ontario Premier Doug Ford.
The advertisement, which was aired in US markets during the baseball World Series, featured a 1987 speech by Ronald Reagan denouncing tariffs.
Trump also threatened to increase Canada’s tariff by 10% following the Reagan advertisement, but has yet to make it official, according to media reports. As part of Trump’s “Liberation Day” tariffs announced in April, the US has imposed a 35% levy on Canadian imports, in addition to 50% on metals and 25% on automobiles.
“While trade negotiations between the US and Canada are currently stalled, the Canadian government is looking to new trading partners to build relations beyond North America,” said Ruth Benbow, Navigator Global’s ecosystem development director for North America.
“The automotive industry is already seeing this change, despite the highly integrated North American automotive industry; Canada is seeing more global automobiles entering their market,” Benbow added.
During a press conference on 26 November, Carney outlined government plans to help the country’s steel and lumber sectors deal with the US tariffs, saying it was time to transform the economy that is reliant on a single trade partner.
The measures include lowering the quota for steel products to 20% from 50% of 2024 levels for non-free trade agreement (FTA) partners, while countries with FTAs with Canada will have their quotas reduced from 100% to 75%.
Canada will also impose a global 25% tariff on imported steel-derivative products such as wind towers, prefabricated buildings, fasteners and wires.
“The world is changing rapidly. The US, the world’s largest economy, is fundamentally reshaping all its trade relationships, causing major disruption and upheaval for Canadians,” the Prime Minister’s Office said in a statement announcing the changes.
In post-budget speeches in November, both Carney and Finance Minister François-Philippe Champagne said a new focus for trade policy was necessary and they aimed to double exports to non-US markets over the next decade, according to Benbow.
“They note that trade agreements are going out of fashion, with Carney saying that the US has changed but Canada must respond,” Benbow said.
“The speeches were still positive on the importance of trade, despite the geopolitical moves away from traditional policies to grow trade and global integration,” she added.