Taking Stock: Divergence in Canadian cities’ trade performance

Key Concepts

• Trade Diversification: The strategic effort to reduce economic reliance on a single market (the U.S.) by expanding exports to other global regions.
• Exposure Risk: The vulnerability of specific cities or sectors to changes in U.S. trade policy, such as tariffs.
• Crowd-in Effect: The economic phenomenon where growth in a major export sector (e.g., aerospace) stimulates secondary and tertiary local businesses, such as services and retail.
• SME (Small and Medium-sized Enterprises): Businesses that represent the untapped potential for increasing the number of Canadian exporters.
• Primary/Secondary/Tertiary Economy: The hierarchy of economic activity, where primary exporters support a broader ecosystem of local service providers.

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1. Disparity in Canadian City Export Performance

Research conducted by the Canadian Chamber of Commerce’s Business Data Lab highlights a significant divide in how Canadian cities are adapting to a volatile trade environment:

• High-Risk Cities: Cities heavily integrated with the U.S. economy, particularly in auto manufacturing (e.g., Oshawa, Kitchener-Waterloo) and resource sectors like steel and aluminum (e.g., Sault Ste. Marie), are struggling. These areas face "frozen" growth as they await clarity on U.S. trade policies.
• Diversified Cities: Cities that have successfully pivoted to non-U.S. markets are showing greater resilience. Notable examples include Toronto (aerospace and gold), Saskatoon (agri-food), Calgary, and Ottawa-Gatineau.

2. The "Exporter" Gap

A critical finding in the data is the disconnect between export value and the number of exporters:

• Growth Statistics: Non-U.S. trade value increased by 17% in 2025.
• The Participation Problem: Despite the value increase, the number of new exporters grew by only 6%.
• Analysis: Matthew Holmes notes that current growth is driven by existing large-scale exporters (often benefiting from commodity price spikes like gold) rather than a broad expansion of the Canadian export base. The goal is to encourage more SMEs to view themselves as global entities.

3. Economic Ecosystems and "Crowd-in" Effects

The discussion emphasizes that exporting is not just about the primary business; it is about the local ecosystem:

• Cluster Development: When a city secures a major export relationship (e.g., aerospace in Montreal or Toronto), it creates a cluster of activity.
• Main Street Impact: This activity supports the "secondary and tertiary" economy—local restaurants, boutiques, and service providers. Conversely, when primary export sectors face layoffs due to trade friction, the entire local community suffers.

4. Strategic Perspectives on Trade

• The "Wake-up Call": Canada’s historical reliance on the U.S. is being challenged by the reality that trade rules can change at will.
• Leveraging Assets: Canada possesses essential global commodities, including oil, gas, agriculture, and critical minerals. These are identified as "cards to play" to gain independence from U.S. market volatility.
• Government vs. Business Roles: While the government is responsible for forging trade deals and creating regulatory pathways, the actual movement of products into global hands requires proactive effort from the business community.

5. Notable Quotes

• Matthew Holmes: "We need more traders in Canada. We need more SMEs and local businesses to view themselves as global businesses."
• Amanda Lang: "Canadians got a wake-up call on trade, and as we turn to new partners and markets, let's make sure we stay awake."

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Synthesis and Conclusion

The core takeaway is that Canada must transition from a passive, U.S.-centric trade model to an active, diversified global strategy. While large-scale exporters have successfully increased the value of non-U.S. trade, the country faces a structural challenge: the lack of new, smaller exporters entering the global market.

To mitigate the risks faced by "front-line" cities (like those in the auto and steel sectors), there is an urgent need for targeted support that recognizes the interconnectedness of the local economy. Ultimately, the path forward requires a dual approach: governments must continue to invest in trade infrastructure and diplomatic pathways, while the private sector must overcome the inertia of past trade habits to integrate into new global supply chains.