National Bank of Canada strategist Angelo Katsoras warns that Canada’s efforts to reduce trade dependence on the United States by pivoting toward the European Union are hitting significant roadblocks due to an increasingly protectionist EU industrial policy stance. The analysis comes as Ottawa has been actively seeking to diversify export markets beyond its dominant US trading partner, which currently absorbs the vast majority of Canadian exports. However, the EU’s shifting approach to industrial policy is creating new barriers that threaten to undermine this diversification strategy.
The development carries implications for Canadian manufacturers and exporters who had been eyeing European markets as viable alternatives amid ongoing trade uncertainty with the US. Currency traders should monitor CAD volatility as export diversification setbacks could impact Canada’s trade balance projections and economic growth outlook in the medium term.
FXnCO Insight
Watch for renewed CAD weakness if Canadian trade data shows stalling EU export growth, forcing continued heavy reliance on US demand at a time of bilateral trade friction.
Source: FXStreet