Carney says Canada must reduce US reliance as tariffs reshape trade outlook

[Forex News]

Canada PM Carney said US ties are now a weakness as tariffs rise, signalling a push to diversify trade and investment amid growing economic uncertainty and tensions with Washington.

Summary:

• Carney says US ties now a “weakness,” not strength
• Points to surge in US tariffs and protectionism
• Canada to diversify trade and attract new investment
• Tariffs hitting autos and steel sectors
• Business investment slowing amid uncertainty
• US-Canada tensions rising, including political rhetoric

Canadian Prime Minister Mark Carney used a weekend address to signal a strategic shift in Canada’s economic positioning, arguing that the country’s historically close ties with the United States have become a vulnerability rather than a strength in an increasingly fragmented global landscape.

In a roughly 10-minute video message, Carney warned that the world is becoming more divided and unpredictable, with the United States adopting a more protectionist trade stance. He pointed to a sharp rise in US tariffs, levels he said had not been seen since the Great Depression, as evidence of a fundamental change in Washington’s approach to global trade.

Against that backdrop, Carney said Canada must adapt by reducing its reliance on the US and pursuing a broader set of economic partnerships. His government, he noted, is focused on attracting new investment and expanding trade relationships with other countries as part of a diversification strategy.

The shift comes as US trade policy begins to weigh more heavily on the Canadian economy. Carney highlighted the impact of tariffs on key sectors such as autos and steel, while also pointing to a broader chilling effect on business investment. Companies, he said, are delaying decisions amid elevated uncertainty tied to the evolving policy environment.

Carney also acknowledged growing political tensions between the two countries, including controversial remarks from US President Donald Trump suggesting Canada could become the “51st state,” comments that have fuelled public frustration domestically.

Framing the moment as a structural turning point, Carney said Canada must confront these challenges directly rather than downplay them, pledging to provide regular updates on efforts to strengthen economic resilience.

The message builds on Carney’s earlier warnings about shifting global power dynamics, including remarks at the World Economic Forum in Davos where he criticised economic coercion by major powers. Those comments drew a sharp response from Trump, underscoring the increasingly strained tone of US-Canada relations.

Taken together, the address signals a clear pivot: Canada is preparing for a world in which its economic future is less tied to the United States and more dependent on diversification and resilience.

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This signals a longer-term structural shift rather than an immediate market move. Reduced reliance on the US implies gradual reorientation of trade flows, investment patterns, and currency dynamics. In the near term, uncertainty around US tariffs and cross-border trade remains a drag on Canadian growth-sensitive sectors. Longer term, diversification could support resilience, but the transition phase is likely to be uneven and investment-sensitive.

This article was written by Eamonn Sheridan at investinglive.com.

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