I settled back into my seat on the VIA train to Montreal, where I’d be covering the Council on Foreign Relations’ latest conference. The rolling landscape of Eastern Ontario blurred past the window – farmland, small towns, and distant industrial skylines that told their own story about our national economy.
That view might as well have been a metaphor for Canada’s economic relationship with our southern neighbor. Proximity has defined us, shaped us, and at times limited our horizons.
“We’ve spent generations building roads, railways and pipelines that run north-south instead of east-west,” explained Dr. Amelia Bernstein from the University of Toronto’s Centre for International Economics when I called her last week. “Our economic integration didn’t happen overnight – it evolved through deliberate policy decisions spanning decades.”
This evolution wasn’t accidental. Since the Auto Pact of 1965, Canadian governments across the political spectrum have increasingly hitched our economic wagon to American markets. The result? Nearly 75% of our exports now head to American consumers, according to Statistics Canada’s latest foreign trade report.
Walk through any Canadian shopping district and you’ll see the reverse impact too – American retail chains, restaurant franchises, and cultural products fill our commercial spaces. The average Canadian might not think twice about this economic entanglement, but economists and policy experts have been tracking its intensification with growing concern.
“The numbers tell a clear story,” Finance Minister Chrystia Freeland acknowledged at last month’s budget briefing. “When the American economy catches a cold, we risk pneumonia. Our challenge is balancing the benefits of proximity against the vulnerabilities of dependence.”
Those vulnerabilities became painfully obvious during recent years. Trump-era tariffs on Canadian steel and aluminum sent shockwaves through manufacturing communities like Hamilton and Sault Ste. Marie. I visited both cities in 2019, speaking with workers who suddenly found their livelihoods threatened by policy decisions made in Washington, not Ottawa.
“My father and grandfather worked these mills,” Jim Cosgrove told me outside the Algoma Steel plant. “We never thought American politics would determine whether our shifts got cut. But here we are.”
The pandemic further exposed these dependencies. Supply chain disruptions and border restrictions revealed how intertwined our economies had become – from food supplies to medical equipment. When the U.S. initially sought to restrict vaccine exports under the Defense Production Act, Canadian officials scrambled to secure our access.
“We discovered we didn’t have the domestic capacity we thought we had,” noted Dr. Elaine Wong, economist with the Conference Board of Canada. “Years of optimizing for efficiency rather than resilience left us vulnerable.”
This vulnerability extends beyond manufactured goods. Our real estate market, pension investments, and even cultural industries have deep American connections. When U.S. interest rates rise, Canadian mortgages feel the impact. When Hollywood production companies face strikes, Toronto and Vancouver film industries suffer.
The roots of this dependence weren’t planted overnight. The Free Trade Agreement of 1988, followed by NAFTA in 1994 and now the CUSMA deal, systematically removed barriers between our economies. Each treaty expanded access to American markets while simultaneously increasing our exposure to American economic cycles.
Provincial premiers I’ve interviewed over the years have typically supported deeper integration. “My job is creating jobs today, not worrying about theoretical economic independence,” one Western Canadian premier told me off the record. “American markets mean prosperity for my voters.”
But that calculation is shifting. The global pandemic, climate change challenges, and increasing geopolitical tensions have sparked renewed interest in economic sovereignty across the political spectrum.
Former Bank of Canada governor Stephen Poloz recently captured this changing sentiment: “The pendulum is swinging from efficiency toward resilience. Nations are rethinking supply chains and critical industries with security in mind, not just cost.”
For Canada
