Bank of Canada says global trade shifts are changing Canadian economy

The Canadian economy is adjusting to major changes in global trade as tariffs and other trade barriers reshape where goods and services are produced and traded, according to the Bank of Canada.

In an article published September 24, the central bank says international trade remains important to Canada because it gives Canadian companies access to international customers while providing businesses and consumers with a wider range of goods and services.

However, the Bank says the trading environment has changed significantly in recent years, creating new challenges for Canadian businesses and workers.

The United States remains Canada's largest trading partner, with Canadian companies selling more goods and services to the U.S. than to all other countries combined. The Bank says U.S. tariffs introduced in early 2025 represented a sudden change in the trading relationship and increased the cost of Canadian-made goods for American buyers.

Businesses can respond by changing suppliers, moving production or looking for customers in other countries. The Bank says these changes can reduce demand for Canadian exports and weigh on employment, investment and economic growth.

Canadian businesses are already adapting, according to the central bank. Some are changing suppliers, investing in technology and looking for customers in markets outside the United States.

The Bank says agricultural products, mineral resources and energy are generally better positioned to find buyers in other markets because of global demand. Manufacturing companies can face more difficulty because of international competition, lower labour costs in some countries and government subsidies elsewhere.

The automotive, steel, aluminum and lumber industries have been particularly affected by U.S. trade actions.

At the same time, the Bank says the impact on some trade-related sectors has been less severe than initially expected, in part because the Canada-United States-Mexico Agreement (CUSMA) continues to protect many Canadian goods and services from tariffs.

The future of CUSMA remains uncertain, the Bank says, and that uncertainty may continue to influence decisions about where companies produce goods and where they source supplies.

The Bank also points to longer-term changes in the global economy, including China's growing manufacturing sector. China now accounts for about one-third of global manufacturing, while the share produced by advanced economies such as Canada has declined.

The central bank says Canada's economy is part of a broader global shift in trade patterns and that businesses will continue to adapt as those changes unfold.

The Bank of Canada says it cannot offset the effects of structural changes in global trade, technology and demographics, but maintaining low, stable and predictable inflation can help support the economy during the adjustment.