In the first six months of 2025, a net of $22.6-billion has flowed out of Canadian stocks and bonds, data released this week by Statistics Canada show.Darren Calabrese/The Canadian Press
If part of U.S. President Donald Trump’s plan is to make Canada uninvestible in the eyes of the world, he seems to be succeeding.
Since Mr. Trump returned to office and cast Canada’s economic future in doubt, global investors have pulled money out of Canadian securities at a record pace.
In the first six months of the year, a net of $22.6-billion has flowed out of Canadian stocks and bonds, according to updated data released this week by Statistics Canada.
“If sustained, foreign investor apathy could be problematic if not downright frightful,” wrote Warren Lovely, chief rates and public-sector strategist with National Bank of Canada, in a note to clients.
For decades, Canada has enjoyed the confidence of foreign investors. Our political stability, rule of law, resource abundance and well-functioning capital markets have been a consistent draw.
A cozy trading relationship with the world’s greatest economic superpower certainly didn’t hurt either.
Going back to the late 1980s, non-residents have poured about $60-billion a year into Canadian financial markets, on average. The pace picked up to $100-billion a year over the past two decades.
The incoming flow of foreign capital is an important source of demand. This is especially true as the big Canadian pension funds have reduced their exposure to domestic stocks dramatically in recent years.
But now it’s easy to see why outside investors have gotten cold feet.
Trump 2.0 has cast a very dark shadow over the Canadian economy. At worst, the offensive is meant to soften Canada up for annexation. At best, Mr. Trump is out to wring big concessions on trade, defence spending and border security.
One big reason the sky has yet to fall is that Canadian exports compliant with the United States-Mexico-Canada Agreement have so far been exempted from tariffs.
Despite the sticker shock of the 35-per-cent tariff the U.S. now levies on Canadian goods, the current effective tariff rate is closer to 6 per cent, according to Royal Bank of Canada estimates.
Should USMCA be doomed, as some have argued it is, and the shield of free trade lost, Canada’s economic security would face a much graver threat.
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This is the bear case confronting global investors considering whether to commit money to Canadian securities. Many of them have understandably chosen to back away.
The domestic stock market has borne the brunt. In the first half of 2025, a net of $43.6-billion has been yanked out of Canadian equities by non-residents.
Foreigners remain net buyers of Canadian bonds, but here, too, there are signs of trouble. After sopping up nearly 75 per cent of Government of Canada bonds issued last year, foreigners’ net absorption of federal debt issued in the first half of 2025 shrunk to near zero.
It’s not just outsiders that seem to have cooled on Canada. The wave of patriotic consumerism and boycotts of American goods evidently haven’t swayed Canadian investors, who accumulated a whopping $124-billion of U.S. securities in the first six months of the year.
“With non-resident investors aloof and Canadians adding foreign assets, the country has suffered a major capital drain,” Mr. Lovely wrote.
What could plug the hole? Some clarity on the country’s trading relationship with the U.S. would be a good start, but that doesn’t appear to be anywhere on the horizon.
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There are lots of ideas floating around about how to make Canada competitive and more investible.
Jay Bala, the chief executive officer to Toronto-based investment manager AIP Asset Management, says capital-gains tax reform is crucial to stopping the flight of capital from Canada.
“We’ve been adamant for a while now that capital-gains taxes need to go to zero if Canada wants to remain competitive,” Mr. Bala said. “The world has changed and we need to adapt.”
Capital-gains tax became a hot-button political issue last year with the now-scrapped Liberal plan to raise the inclusion rate for how much of the proceeds from an asset’s sale would be subjected to tax.
Mr. Bala argues that capital-gains tax revenues are a fairly minor source of funds for the federal government.
“If you cut it, you’re going to get so much for the economy,” he said. “It improves capital mobility, it stimulates entrepreneurship, and it encourages investments in risky assets.”