Canada, traditionally a fixture in the trade network of the United States, has recently diversified its economic partnerships, most notably strengthening ties with the European Union (EU). This shift, while not completely cutting off its reliance on the US, marks a major shift in the North American trade landscape.
A catalyst for enhanced cargo growth The Comprehensive Economic and Trade Agreement (CETA) has been key in further solidifying Canada-EU economic ties. Effective 2017, CETA has eliminated tariffs on over 98 percent of goods traded between Canada and EU nations, significantly enhancing market access.
Because of this, there’s been an increase in bilateral trade, including goods transported via air cargo, such as pharmaceuticals, perishables, and precision machinery parts. According to a report by Reuters, Canadian exports to the EU saw significant growth, indicating the agreement’s positive impact. CETA has granted Canadian exporters fast access to the EU’s vast consumer market. As trade expands Eastward for Canada, the agreement is fast becoming a major component of their long-term economic strategy.
Canada’s pivot toward the EU is a direct response to economic and political tensions with the US. One of the biggest catalysts was the Trump administration’s 2018 tariffs on Canadian steel (25 percent) and aluminium (10 percent), which led to retaliatory tariffs from Canada. The uncertainty surrounding the renegotiation of NAFTA into the USMCA further fueled concerns. To reduce its reliance on a trade partner that could shift policies unpredictably, Canada sought out a more stable alternative. The EU emerged as a logical choice.
With the CETA agreement in effect since 2017, the Canadian air cargo industry has expanded routes to Europe to accommodate rising demand for pharmaceuticals, technology, and e-commerce shipments. By strengthening ties with the EU, Canada ensures more predictable trade flows, enabling businesses to invest in long-term infrastructure and planning with greater confidence. Economic implications for North America Canada’s deepening EU trade relationship will likely have a significant effect on North American trade dynamicsr. Canadian firms are exploring European export opportunities, potentially shifting supply chains away from US counterparts. The potential for realignment presents both opportunities and challenges for North American operations which could lead to the development of new hubs and routes.
Also, if Canada continues to prioritise EU trade, the US may face a more fragmented North American supply chain, with potential shifts in air cargo routes and volumes. This could prompt the US to rethink its trade policies with both Canada and the EU, potentially seeking to reassert its influence in the air cargo sector.
These shifts represent a realignment of North American trade and, according to Canadian Foreign Affairs Minister Melanie Jolie, could benefit Canada in the long run, which might lead to the creation of new trade agreements and adjustments to existing ones, further affecting the flow of goods across the Atlantic. What evolving US-Canada trade relations mean for air cargo Canada and the US remain deeply connected trading partners, but their increasingly divergent priorities are currently reshaping the air cargo landscape. Canada’s push for stronger environmental policies, such as its Clean Fuel Regulations, contrasts with US efforts to boost domestic manufacturing through the Inflation Reduction Act, creating potential friction in supply chains.
Meanwhile, the rise of “Buy American” provisions could limit Canadian suppliers’ access to US contracts. Air cargo operators must adapt to these shifts by reassessing routes, investing in sustainable aviation solutions, and navigating evolving customs frameworks like the Canada Border Services Agency’s new CARM system. To maintain stability and efficiency in cross-border airfreight, stakeholders will need an approach that aligns with this new reality while safeguarding the seamless flow of goods between the two nations.
Canada’s shift towards Europe could also potentially disrupt established air cargo routes and lead to the renegotiation of certain trade agreements to maintain US business access to Canadian markets. Any adjustments would require a flexible approach, which means the US will likely have to resume a cooperative relationship with Canada that focuses on mutual benefit.
