Canadian businesses want increased trade diversification but few are planning on it

In the latest The Business Monitor, the vast majority of businesses want greater diversification of international trade. However, just 1 in 5 are likely to increase international trade beyond the US in the face of Donald Trump’s trade war. 

Key findings in this release:

  • There has been a large increase in the desire for increase trade diversification.
  • We also see a large increase in the number of business leaders who think this is possible.
  • Yet relatively few say they are likely to increase trade beyond the US.

In the last quarter, there has been a big jump in the number of Canadian businesses who want greater diversification of international trade.

Over the past year, there has been a notable increase in the number of companies that say Canada needs to have greater diversification of trade outside the US.

  • While this was already at high level prior to the US election and threats of tariffs, the increase is substantial. Relatively few think greater integration with the US should be on the menu.

The current result is largely consistent across region, company size, and sector.

  • One exception is the Prairies, where a relatively high number remain focused on greater integration (26%).

Over the past year, there has also been a big shift in the number who believe Canada can diversify its international trade.

The number of business leaders who say Canada has strong potential to diversify has doubled over the past year.

  • This shift is particularly pronounced in Quebec where one quarter said it was not possible for Canada to diversify back in 2024 – a view now held by just 3% in this province.

Canadian businesses are more than twice as likely to increase domestic focus as opposed to global.

Asked about how their firm might respond to the nascent trade war, only a modest minority of businesses plan to diversify internationally (20% highly likely). Canadian businesses are more than twice as likely to increase their domestic focus (45% highly likely).

Importantly, the results for increased domestic or global trade do not vary by firm age or size.

Discussion

Over the past few decades, Canada has become increasingly dependent on the US for its international trade. Donald Trump’s trade war has exposed a major economic vulnerability for Canada.

A large majority recognized this before the trade war and it is now nearly universally recognized. Yet Canada is not in a great position to diversify its international trade; only 1 in 5 business say they will expand globally. 

Clearly, experience with US trade provides critical groundwork for companies to expand globally. What can be done to move other companies into international waters? The Business Monitor will continue to explore this issue over the coming months.

Methodology

These results come from the latest edition of The Business Monitor which is powered by the Modus Business Panel – the only purpose-built, 100% probability-based business panel in Canada. 

Because the Modus Business Panel is built entirely using random probability sampling, it is valid to cite the margin of error for this survey. The survey is based on a representative sample of 863 Canadian enterprises and has a margin of error of +/- 3.3% points, 95 times out of 100. The survey data was collected from March 6 to 23 and is weighted by enterprise size and region based the latest Statistics Canada data.

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