Canada is a staples economy, exporting wheat, canola, oil, natural gas, uranium and critical minerals largely unprocessed, while importing the technologies and intellectual property that refine them. The country forfeits much of the profit from its own resources as a result.
Canada has suffered a long-gathering productivity crisis. GDP per person has been shrinking by 0.4% a year since 2020—the worst rate of the 50 most developed economies. Real GDP per person fell in each of the two years to 2025, returning to its 2017 level. Productivity fell from 81% of the American level in 2000 to 68% in 2023. Investment per worker tumbled from 60% of America's to 41% over the same period. Lagging productivity has cascade effects: higher debt-servicing costs, crumbling infrastructure, stagnating wages and a housing affordability crisis for young families.
Interprovincial barriers to capital and labour have long hampered Canada's internal market. As of early 2025, federal and provincial governments committed to abolishing them by July 1st, spurred in part by American tariff pressure.
Canada exports 77% of all of its goods to the United States. This trade supports more than 2m jobs, some 10% of all employment. America produces only 16% of the aluminium it uses, making it dependent on imports—mostly from Quebec's cheap hydro-powered smelters—for years to come. American tariffs of 50% on Canadian steel and aluminium and 25% on cars, first applied in April 2025, have hit hard. Exports of cars to the United States fell by 23% month-on-month in April. Unifor, the union representing most of Canada's auto workers, says 6,000 of its members have been laid off; 1,000 steelworkers have also lost their jobs. Goods exports over Canada's southern border were down 26% from their January peak by mid-2025. Unemployment rose to 7% in May 2025, its highest rate (barring the pandemic years) since 2016. By August 2025 it had risen to 7.1%; in cities dependent on car manufacturing, such as Windsor, Ontario, it was running as high as 11.1%. In the second quarter of 2025 Canada's GDP fell by 0.4% as exports to the United States collapsed.
The economy grew by just over 1% in 2025 despite Trump's tariffs—more slowly than at any time since the covid-19 pandemic, according to Statistics Canada—but sectoral duties pummelled the steel, car and aluminium industries in eastern Canada, leading to thousands of layoffs. Exports fell by 1.7% for the year and private business investment by 0.3%. Unemployment rose to 6.7% in February 2026 after 84,000 jobs were lost, primarily among young people. The rising cost of food is causing anxiety; visits to food banks reached an all-time high in 2025.
On July 31st 2025 Donald Trump imposed a 35% tariff on Canadian exports, adding fuel to the nationalist outrage that drove the Liberal surge in April. On June 29th 2025, under Trump's threat to abandon trade talks, Mark Carney had scrapped Canada's digital-services tax—a 3% levy on local revenue from tech firms including Google, Uber, Meta and Amazon—hours before it was due to come into effect. Both leaders set a July 21st deadline for bilateral talks aimed at eliminating or significantly reducing the tariffs. Trump has also demanded that Canada pay $71bn towards Golden Dome, America's proposed missile-defence shield, or agree to become the 51st state. In late January 2026 he threatened 100% tariffs on all Canadian exports if "Canada makes a deal with China" and called USMCA "irrelevant".
Justin Trudeau, Canada's long-serving Liberal prime minister, resigned on January 6th 2025. He was succeeded as Liberal leader by Mark Carney, a former central banker. The Conservatives are led by Pierre Poilievre, a career politician. Alberta is the Conservatives' stronghold; its premier, Danielle Smith, has promised to make it easier for citizens to launch referendums.
Canada's Parliament has 343 seats. The Liberals and the Conservatives are the only two parties that have ever formed a government in Canada's 158-year history. The collapse of the socialist New Democratic Party (NDP) from 18% to 6% in 2025 has, for the time being, turned Canadian politics into a two-party tussle, ending the split progressive vote that once helped the Conservatives to victory. A quarter of Canadian residents are immigrants. Federal laws passed after Quebec came within 60,000 votes of seceding 30 years ago dictate that any bid for provincial separation can proceed only when a "clear question" leads to a "clear majority".
In the April 28th 2025 election, Mr Carney led the Liberals to 169 seats—three shy of a majority—forming a minority government and a rare fourth consecutive Liberal term. The Liberals hold 25 more ridings than the Conservatives, down from a 41-seat gap in 2021. The Conservatives lost the popular vote by two percentage points, after winning it by one in 2021. The New Democratic Party fell from 18% of the vote to 6% and the People's Party from 5% to 1%.
Underneath stable nationwide totals, the average riding-level margin between the two big parties shifted by nine percentage points from 2021 to 2025—twice as much as the shift in the average American county between 2020 and 2024. Educated and native-born voters swung towards the Liberals; immigrant and non-degree voters swung towards the Conservatives, mirroring the demographic realignment that returned Donald Trump to the White House.
On July 30th 2025 Canada said it would recognise a Palestinian state in September, subject to some conditions, following similar announcements by France and Britain.
The USMCA, the trade deal that replaced NAFTA, shields most Canadian exports from American tariffs. Its first formal review is due on July 1st 2026. Canada has raised official objections over the failure of the United States to honour the deal's duty-free quota for cars and car parts invoked under national-security tariffs. Canada sends three-quarters of its exports south, including oil, wood, car parts and aluminium. The United States reportedly wants upfront concessions from Canada before starting formal USMCA talks.
According to Statistics Canada, only 67% of exports went to the United States in October 2025—down from 76% before Trump's tariffs and the lowest share since 1997 (excluding the pandemic period). Exports to the rest of the world jumped by 15.6%, a record high; larger shipments of oil to China made up a striking portion of the rise. Canada's heavy oil-sands crude is compatible with Venezuelan crude, making it a natural substitute for Chinese refiners who had been buying Venezuelan oil at a discount. Data from Kpler, a research firm, suggest 40% of Canada's seaborne crude exports went to China in 2025.
An estimated 30% of Canadian firms, especially those with factories on both sides of the border, have begun shifting production and investments to America or are considering doing so. Traditional industries and commodity producers, such as Quebec's aluminium smelters, depend hugely on America and treat it almost as a second home market. Advanced industries with global supply chains have more options, but warn that finding new markets in Europe or Asia would be a "ten-year project".
Canada pledged nearly $1bn to support its lumber industry against American tariffs. It is also looking beyond America: Mark Carney is set to visit Mexico to discuss supply-chain resilience, port-to-port trade and joint ventures in energy and artificial intelligence. With the USMCA up for review in 2026, Canada and Mexico are hoping to create leverage they can use against Donald Trump. Canada sent its largest-ever trade mission to Mexico in early 2026; a Mexican delegation is expected in Canada soon.
Carney's longer-term vision is to bridge the European Union and CPTPP, the world's fourth-largest trade bloc (12 countries, 14% of global GDP), into a rules-based trading system outside the United States and China. He believes America has changed permanently and that the era of steadily increasing integration is over. He has described the shift as "a rupture".
Canada formally recognised China in 1970, breaking from America's position at a time when few Western countries had diplomatic ties with the People's Republic. Relations frosted over in 2018 after Canada arrested Meng Wanzhou, an executive of Huawei, on behalf of America. In apparent retaliation, China detained two Canadians, Michael Spavor and Michael Kovrig. All three were freed in 2021, but ties remained severely strained. Donald Trump's tariffs and talk of annexation prompted Canada to reconsider. In October 2025 Mark Carney shook hands with Xi Jinping on the sidelines of an Asia-Pacific meeting in South Korea; both sides called it a "turning point". Carney accepted Xi's invitation to visit China.
Canada-China goods trade was worth $86bn in 2024, making China Canada's second-biggest trade partner—but it takes only about 4% of Canada's exports. Canada wants to double exports to markets outside America by 2035. Late in 2024, taking its cue from the Biden administration, Canada imposed 100% tariffs on Chinese electric vehicles. China retaliated with tariffs on canola—Canada's biggest export to China—as well as seafood and pork. In January 2026 Mark Carney agreed to drop Canada's 100% tariff on Chinese EVs to just 6.1% for at least the first 49,000 cars imported each year; in return, China agreed to cut tariffs on Canada's agricultural exports, including rapeseed from Saskatchewan. In November 2025 China ended a pandemic-era restriction on tour groups to Canada. An Angus Reid Institute poll in September 2025 found that 27% of Canadians viewed China favourably, up from 16% earlier that year.
In late January 2026 Mark Carney announced a tax break worth C$7,500 ($5,500) for poorer families over the next five years.
Canada is the only member of the G7 to have achieved a post-war debt consolidation primarily through budget adjustment, between 1997 and 2006. It is also part of a small group of rich economies that has avoided a big run-up in debts in the 21st century: it enjoys low debt, a small necessary fiscal adjustment, and space to raise taxes. Canada has accumulated pension assets over 100% of GDP.
Canada has world-class universities and research facilities, but has struggled to commercialise scientific breakthroughs since the collapse of BlackBerry's smartphone dominance. Canadian firms rarely invest in university-based research and the country lacks the specialised venture-capital market that powers Silicon Valley.
Alberta has the highest GDP per person in Canada and the third-largest proven reserves of oil in the world. Its 5m people are among the country's richest. The oil-rich province has long harboured anti-Ottawa sentiment. After Mark Carney's Liberal election win in April 2025, premier Danielle Smith lowered the signature threshold for citizen-initiated referendums from 600,000 to 177,000, opening a path to a vote on secession. A May 2025 Léger poll found 47% of Albertans supporting independence, with 48% opposed. Nancy Southern, the boss of ATCO, a large Canadian energy conglomerate, has warned that the mere possibility of separation is already driving away investment; potential partners in Japan and South Korea are asking questions about the rules, currency and security of an independent Alberta. Alberta's 45 indigenous groups say their treaty relationship is with the British Crown and they would remain sovereign nations within any independent Alberta. Scott Bessent, America's treasury secretary, encouraged the secessionist movement, saying Alberta should "come on down" and join the United States; he linked Albertan independence to its thwarted attempts to build pipelines. In November 2025 Mark Carney signed an agreement with Alberta to fast-track the construction of an oil pipeline that would send 1m barrels daily to the Pacific coast for export.
The independence movement had until May 2nd 2026 to collect the 177,732 signatures required to trigger a referendum in October. Its leaders claimed to have gathered more than 178,000. But support for independence has waned: just one poll has put it above 30% since the start of 2026. Mr Carney's decision to roll back some of his predecessor's green policies and his push to finalise an agreement to boost Alberta's oil and gas output have softened grievances; Ms Smith said the deal would end "dark times" between Alberta and the Liberals. Jason Kenney, a former premier, has warned that referendum talk is adding to economic uncertainty and deterring investment.
The province's indigenous First Nations argue that independence would undermine their treaties with the Crown, signed before Alberta became part of Canada, by turning provincial borders into international ones that slice up indigenous lands. In April 2026 several chiefs visited Buckingham Palace in full regalia to enlist King Charles's support; Chief Daryl Watson reported the king was "interested in trying to preserve the integrity of the country". On April 10th 2026, after a request by the Athabasca Chipewyan First Nation and the Blackfoot Confederacy, a judge ordered a one-month pause before provincial authorities could begin certifying petition signatures. If courts find independence would violate First Nations' rights, it could stymie the separatists' hopes altogether.
Polls suggest the separatist Parti Québécois (PQ) is poised to take control of the Quebec legislature in provincial elections no later than October 2026. The party has promised to hold another independence referendum if elected. In a referendum in 1995 Quebec came within one percentage point—54,000 votes—of opting to leave the federation.
Eastern Canadians broadly favour becoming a green-energy superpower, while Western Canadians want to expand oil and gas production. Quebec has vast natural-gas reserves under its St Lawrence Basin that could, if shipped to Europe, reduce European dependency on Russian energy, but Quebeckers have withheld the social licence needed to develop them.
Canada already has a joint aerospace-defence command with America. As of May 2025 it was in talks about joining Golden Dome, America's proposed missile-defence shield.
Canada and the United States have exchanged military personnel for decades. Exchange officers take an established position in a given unit and are subject to the orders and discipline of the host military. When orders conflict with Canadian military regulations, a process known as "caveating" places strict limits on what Canadian personnel may do. As of early 2026 at least six brigadier-generals, one rear admiral and three major-generals were scattered across the United States Army, Air Force, Navy, Space Force and the Department of Defence; hundreds of lower-ranked Canadian soldiers may also be serving in the United States at any time. Operation CARIBBE, an enhanced counter-narcotics operation in which the Canadian Armed Forces deploy ships and aircraft to the Caribbean on rotation, has been active since 2006.
The Canadian Armed Forces have 67,000 full-time personnel and 27,000 reserves—all volunteers—responsible for defending almost 10m square kilometres. They are stretched thin between far-flung operations: in Latvia they bolster the defence of the Baltic states, and in Asia a naval mission works to keep the Taiwan Strait open to international shipping. Troops are also regularly called on to help with floods and forest fires. Defence spending first drifted below 2% of GDP more than three decades ago; for much of that period Canada depended on the United States for much of its territorial defence.
Mark Carney has promised to spend C$82bn ($59bn) over five years so that Canada is on a path to devoting 5% of its GDP to defence by 2035, with much of the money earmarked for the Arctic, where Russian submarines and Chinese "research" ships are making increasing forays. General Jennie Carignan, Canada's top soldier, is building a 400,000-strong civilian-defence force of volunteers aged 16 to 65—heavy-equipment operators, drone operators and cyber specialists—to help with military threats and natural disasters, freeing up the regular army for homeland defence. In November 2025 she dispatched a team to Finland to study that country's extensive civil-defence system.
Canada and the United States have been peaceful since 1815, before Canadian independence.
Five percent of Canadians describe themselves as indigenous, but they account for a third of the people in prison; in women's prisons the figure is half. Indigenous men have the highest rates of recidivism of any group in the country.
Canada operates ten "healing lodges", alternatives to conventional prisons based on indigenous practices and beliefs. The first opened in 1995. Elders counsel inmates and teach indigenous languages and history; they also lead spiritual ceremonies, dances and feasts. Each lodge reflects the traditions of its region—one in Manitoba has a tipi-inspired design, another in British Columbia a longhouse. At Willow Cree Healing Lodge, inmates are called nîcisânak, a Cree word for siblings, and their day begins with prayers and smudging. Men who go through healing lodges are half as likely to end up back in jail as similar offenders in conventional prisons, according to Justin Tetrault of Simon Fraser University. In total the lodges hold about 450 beds—enough for less than 10% of the indigenous prison population—and most have long waiting lists.
The Hudson's Bay Company, Canada's oldest company and once the country's prime retailer, was liquidated in June 2025. Created by royal charter in 1670, HBC once held dominion over a third of what would become modern Canada. Its stores, "portholes into Canada's past", had long fallen into shabbiness. In December 2025 two wealthy Canadian families bought the original five-page vellum charter for C$18m.
Canada's state-school system mostly separates religion from education, allowing religious schools to operate privately. Private Islamic school enrolment is rising, with long waiting lists and new schools opening fast. Edmonton Islamic Academy (EIA), founded in 1987, is the largest Islamic school in the Americas, with 1,400 students. It is building a C$80m ($60m) extension to accommodate a waiting list exceeding 1,500. Private Islamic schools must follow the curriculum set by their province, but integrate Islamic lessons creatively—interspersing Koranic study with science and maths. Many extend the school day so pupils can learn to recite the Koran. School boards in Ontario, Manitoba and British Columbia have adopted anti-Islamophobia policies.
Canada's hospital waiting times are among the worst in the rich world. The median waiting time for specialist treatment was 29 weeks in 2025, more than a third higher than the 2019 baseline, according to the Fraser Institute, a think-tank in Vancouver. That was the second-worst result since the survey began in 1993; the record of 30 weeks was set in 2024. A record number of sick and injured simply give up and leave emergency rooms before being seen.
A proposed high-speed railway between Windsor and Quebec City has been in the planning stages for decades, in contrast to China's Shanghai–Beijing line, which was built in three years. Canada's review and permitting system, designed to secure "social licence" for new projects, is widely seen as an obstacle to investment.
What good is a ticket to the good life, if you can't find the entrance?