Canadian Prime Minister Mark Carney and Europe forge new alliances in the face of U.S. trade hostility.
This article appears in the November issue of Global Finance Magazine.
Tariffs and a return to the U.S.’ manufacturing glory days have been rallying cries for President Donald Trump since his first term in office. One ally, surprisingly, is now in his sights: Canada, the friendly neighbor to the north. After attempts at negotiation, appeasement, and policy changes on such matters as taxes on tech companies and electric vehicle imports from China, Canada has pivoted in a big way.
As recently as early last month, Washington said it was in no hurry to resume trade negotiations with Canada because commodities such as oil and potash still trade freely.
Accordingly, under Prime Minister Mark Carney, Canada is taking steps to pivot away from the U.S. and toward other middle powers, mainly—but not exclusively—in Europe. However, Canada’s trading and diplomatic shift is not just about Trump; Ottawa is motivated to diversify its trading relationships with more stable partners, who have, in turn, reciprocated with friendly overtures and relationship-building.
Last summer, the Carney government hosted a first-of-its-kind Canada Investment Summit, inviting some of the world’s top investment firms and institutional investors. The summit led to nearly 500 billion Canadian dollars in new investment across sectors such as critical infrastructure, digital technology, energy, and defense.
In his keynote address, Carney announced major policy measures, including a new productivity mega-deduction for business investment that allows businesses to write off most new capital investments immediately, effectively lowering the marginal tax rate on new investment from 6.4% to 13%; a streamlined permitting process for new projects; a formal asset-recycling policy; and plans to seek private investment for Canada’s four largest airports.
Also in the mix: a new Maple Fund, created by the Canada Pension Plan Investment Board and New York-based Brookfield Asset Management, to invest in Canadian projects, and CA$10 billion in additional Canadian investment committed by the Ontario Teachers’ Pension Plan. Not to be overshadowed, Canada’s major banks have committed billions to key Canadian sectors over the next five to 10 years.
From AI to the Arctic
Carney left the summit early for Europe, where he delivered a keynote address to the European Parliament. European Commission President Ursula von der Leyen followed with a proposal that Canada become the EU’s first “associate member”: a term not yet defined and not fully desired by some on the left side of the Atlantic.
And the ties continued to deepen. An EU-Canada summit was scheduled for the end of October in Montreal, where discussions are expected to focus on cooperation and partnerships in areas such as digital trade, critical minerals, defense, and energy.
The proposed partnership goes beyond trade. Ottawa and Brussels are expected to pursue greater coordination on AI, quantum technology, cybersecurity, and economic security, while integrating parts of their defense industries, with the Arctic at the center of their cooperation.
“We are joining forces voluntarily,” von der Leyen said in her State of the Union address before the European Parliament. “We will create a tech alliance. We will integrate defense industrial bases. We will make the Arctic a flagship joint project. We will work on energy, critical minerals, and batteries, on AI, quantum, cyber, and economic security.”
Voluntarily, perhaps, but with a significant push from an ally who may be increasingly isolated in a changing geopolitical environment.
Joel Kranc is a contributing writer based in Canada.