Vehicles cross the Peace Bridge at the Canada-U.S. border crossing in Fort Erie, Ont., on April 2. While 75 per cent of Canada’s goods exports flow to the U.S., just over half of services exports go there, with the rest spread across Europe, Asia and other regions.Carlos Osorio/Reuters
Danielle Goldfarb is a Canadian Standards Association public policy fellow and senior fellow at the Munk School of Global Affairs and Public Policy. The following draws from her research paper, Canadian Trade Realities and Strategies After the U.S. Trade Shock, published by the CSA Public Policy Centre.
Since the Trump trade shock, Canada has focused on preserving tariff-free access to the world’s largest market – the United States. Ottawa is right to use every tool it has to maintain this access. The reality is that our standard of living benefits significantly from deep integration with the U.S., and the country will remain Canada’s dominant trading partner.
But there is more to Canada’s trade story than goods moving across the border. Let’s consider a fuller, more modern view of trade, one that is more diversified than commonly understood and presents new opportunities for growth in areas of Canadian expertise.
A key part of this broader picture is services, especially commercial services such as financial, software and consulting. While historically, businesses only sold these services close to home, they are now increasingly provided across borders. Cloud computing, as well as recent advances in artificial intelligence that allow for seamless real-time translation are expanding the menu of what can be traded. Geography and language no longer limit trade options as much as they used to.
Canada is a services-based economy, with that sector accounting for nearly three-quarters of Canada’s gross domestic product, according to data from Statistics Canada. And despite rarely being mentioned in ongoing trade discussions, services account for at least one in five Canadian exports.
And this is almost certainly an under-representation of the role that services play in trade. Traditional trade figures overcount physical goods, undercount services and leave out some Canadian digital services exports, such as those routed through U.S. platforms.
Opinion: Canadians can put their elbows down and keep their heads high
Trade numbers also don’t usually mention services sold by Canadian affiliates abroad, which account for two of every three of those affiliate sales. Finance, insurance and professional services – for example, Sun Life selling insurance through its Asian operations – account for the vast majority of those sales.
Canada excels in many high-value services, from environmental to engineering to world-leading AI research. We are translating these strengths globally: Commercial services are the fastest-growing part of Canada’s trade. They are also the fastest-growing part of global trade. From 2017 to 2023, commercial services exports across the world grew nearly twice as fast as exports of goods.
When we add services into the picture, what Canadians trade – and where – is already more diversified than most realize. While 75 per cent of Canada’s goods exports flow to the U.S., just over half of services exports go there, with the rest spread across Europe, Asia and other regions. These exports also face a different set of barriers, including data-localization rules and divergent standards. Services therefore provide a hedge against tariff risk and an opportunity for trade growth.
Canada has yet to take full advantage of its strengths in high-value services, despite rapidly growing global demand. Canada’s share of global digital services exports remained stuck at about two per cent in 2024 – well behind peers with similar economic size and expertise in AI.
Canada should build on its leadership in advancing free and open trade around the world. It should push forward in using, expanding and modernizing trade deals to reflect a digital and AI-driven economy. Ottawa should also bolster digital infrastructure, ensure data can freely and safely flow across borders, and reorient support toward the full array of global sales now possible.
Canada’s standard of living depends on trade. We must protect our economy against tariffs and preserve the benefits of Canada-U.S. integration. At the same time, we need a positive trade agenda that builds on Canada’s assets, capitalizes on global demand, and opens access to a wider range of new possibilities. We have a chance to build a confident, modern trade strategy that reflects how Canada does business today, and where we can be internationally competitive tomorrow.