Canada‘s manufacturing sector has a concentrated dependence on the United States for its value added.

Canada excels in the production of high-value manufactured goods. These include automobiles, auto parts and industrial machinery. Aerospace, chemical and electronic products also stand out. In addition, the country manufactures processed foods, paper and processed wood.

These products play a key role in the Canadian economy. A large part is destined for export, especially to the United States.

Canada’s manufacturing sector

Canada’s manufacturing sector depended on U.S. demand for 42% of its value added. In addition, almost 688,000 manufacturing jobs depended on U.S. demand, representing 41% of the sector’s total workforce.

In short, it is one of the industrial sectors with the greatest exposure to the U.S. market.

The United States is Canada’s main trading partner. It accounted for 75.9% of its total exports of goods and 62.3% of its imports in 2024. It also led in services trade, accounting for 50.2 % of Canada’s exports and 55.7 % of its imports.

Canada is the second most important partner for the United States and the number one destination for its merchandise exports. The two countries have a deep trade relationship, with highly integrated sectors such as energy and automotive.

Bilateral trade has been governed by key agreements. Since 1989, it began with the Canada-U.S. Free Trade Agreement. It then moved to NAFTA in 1994 and is currently governed by the USMCA, in force since July 2020.

Tariffs

However, U.S. tariffs on Canadian products and retaliatory measures by Canada add tension to the picture. Canadian exports could be seriously affected if these measures intensify.

Both countries continue to negotiate on these tariffs. In addition, together with Mexico, they plan to review the USMCA in July 2026.

In total, more than 2.6 million jobs in Canada and about 17% of its value added were linked, in 2023, to U.S. demand for Canadian products.

Canada is the only G7 country to have signed trade agreements with all other G7 countries.