Carney Signs UAE Trade Deal to Cut Tariffs on Over 99% of Canadian Exports as U.S. Trade Dispute Drags On

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Canada has added another major piece to its trade-diversification strategy at a moment when access to its largest market is unusually uncertain. On October 27, Canada and the United Arab Emirates signed a Comprehensive Economic Partnership Agreement in Ottawa, with Prime Minister Mark Carney and Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan presiding over the ceremony.

The agreement is designed to strip away most tariffs on Canadian exports, widen access for services and investment, and deepen a relationship that Ottawa increasingly sees as a bridge into the Gulf and wider Middle East. It also lands while Canada and the United States remain locked in a tariff dispute that has pushed Ottawa to look harder for growth beyond North America.

A 47-Day Negotiation Became a Signed Pact

The speed of the Canada-UAE deal is part of what makes it unusual. The two governments announced their intention to pursue a trade agreement in November 2025 and concluded negotiations in July 2026 after what Ottawa describes as a record 47 days. The agreement was formally signed on October 27, 2026. Canada’s International Trade Minister Maninder Sidhu and UAE Foreign Trade Minister Thani bin Ahmed Al Zeyoudi signed the pact, while Carney and the Abu Dhabi crown prince presided over the ceremony during the first visit to Canada by a Crown Prince of Abu Dhabi.

That timeline matters because major trade agreements commonly require much longer negotiating periods. In this case, the governments completed three rounds of discussions over roughly two months, helped by an already-deepening investment relationship and years of commercial ties. The deal is not yet active, however. Ottawa lists it as “signed” but “not in force,” with implementation expected in 2027. For Canadian exporters, that distinction matters: the commercial opportunity is much clearer today, but actual tariff savings begin only after the agreement completes the steps required to take effect.

The 99% Tariff Claim Comes in Stages

The headline figure is sweeping, but it does not mean every tariff disappears on the first day. When the CEPA enters into force, the UAE is expected to provide preferential access on 93.4% of tariff lines, covering 93.6% of current Canadian exports. After scheduled phase-ins are completed, duties are set to disappear on more than 97% of tariff lines covering more than 99% of Canada’s current exports to the UAE.

That structure gives the agreement both an immediate and a longer-term payoff. Some products become duty-free as soon as the pact starts, while others move toward zero over several years. The practical benefit is straightforward: lower border costs can make Canadian products more competitive against suppliers from countries that already enjoy preferential access to the UAE. The CEPA also reaches beyond tariffs by addressing import licensing, technical barriers, sanitary and phytosanitary rules and other forms of red tape. For exporters, a lower tariff is valuable, but predictable paperwork and clearer customs rules can matter just as much when trying to turn a first overseas sale into repeat business.

Farmers, Aerospace Firms and Manufacturers Stand to Gain

Agriculture is one of the clearest beneficiaries. The agreement provides preferential treatment for 98.7% of current Canadian agricultural exports to the UAE. Ottawa says tariffs will be eliminated when the agreement takes effect on major exports including lentils, peas, chickpeas, kidney beans, canola seed, French fries, potatoes, beef and a range of prepared foods. Canada also secured tariff reductions for wine and sparkling wine. At the same time, Ottawa says the agreement grants no additional market access for Canada’s most sensitive supply-managed agricultural products.

Industrial exporters also receive substantial coverage. The CEPA is set to eliminate tariffs on 92% of Canadian industrial exports, including all aerospace goods and selected products such as gas turbines, certain light vehicles, skin creams and diamonds. Canadian industrial exports to the UAE averaged about $2.8 billion annually from 2023 through 2025, representing more than three-quarters of Canadian exports to the market over that period. Forest products receive broad tariff elimination as well, while all tariffs on Canadian fish and seafood are scheduled to disappear. That gives the agreement relevance stretching from Prairie agricultural producers to aerospace and advanced-manufacturing supply chains.

The UAE Is a Small Market With Outsized Regional Value

The UAE has a population of roughly 12 million, yet it is already Canada’s largest export market in the Middle East. In 2025, two-way merchandise trade was approximately $3.5 billion, including roughly $2.8 billion in Canadian exports and about $670 million in imports. Canadian merchandise exports to the country increased around 10% that year after rising 24% between 2023 and 2024, meaning the relationship was expanding even before preferential tariff access was locked in.

The product mix also demonstrates why Ottawa sees room for growth. Motor vehicles and parts accounted for about 15% of Canadian merchandise exports to the UAE in 2025, while machinery represented roughly 14%. Services are significant too: bilateral commercial services trade reached $445 million in 2024. More than 150 Canadian companies have an operational presence in the UAE, and the Canadian government estimates approximately 60,000 Canadians live and work there. Dubai and Abu Dhabi therefore matter as more than final destinations for exports. Their ports, airlines, logistics networks and business infrastructure can also connect Canadian companies with customers across the Gulf and surrounding regions.

Trade Is Only Half the Story: C$70 Billion in Investment

The CEPA sits beside a much larger investment push. During Carney’s November 2025 visit to Abu Dhabi, the UAE announced an investment framework of up to US$50 billion in Canada, which Ottawa valued at approximately C$70 billion. The identified sectors include energy, artificial intelligence, logistics, mining and other strategic industries. Canada and the UAE also signed a Foreign Investment Promotion and Protection Agreement during that visit, and it entered into force on May 19, 2026, creating a more predictable framework for investors from both countries.

The October 2026 visit brought additional commercial links. DP World signed a memorandum with Arctic Gateway Group and CentrePort Canada aimed at developing trade opportunities around a transportation corridor connecting the Port of Churchill, the Hudson Bay Railway and inland logistics infrastructure. Masdar and Natural Resources Canada established an energy cooperation framework, while Invest in Canada and the Abu Dhabi Chamber agreed to facilitate business connections and visits. Taken together, Ottawa is pursuing something larger than export growth: it is seeking Emirati capital that can help finance the infrastructure, energy and technology needed to send more Canadian products to more markets.

The U.S. Dispute Makes the Timing More Important

The agreement arrives against a much more difficult North American trade backdrop. Canada-U.S. negotiations broke down in August after Ottawa rejected American terms it said were not in Canada’s interests. The United States subsequently imposed a 50% tariff on approximately C$27.6 billion of Canadian goods under Section 338, and Canada responded with counter-tariffs covering the same value of U.S. imports. Separate U.S. Section 232 measures have placed tariffs of up to 50% on Canadian steel and 25% on autos, two industries that have become central to renewed negotiations.

There have been signs of movement, but no comprehensive settlement. Reuters reported on October 26 that the two governments were working on possible relief from steel and automotive tariffs. A Canadian official said the next day that recent discussions had produced only “limited progress,” even as Carney acknowledged that talks had intensified slightly. That explains why the UAE agreement carries political weight beyond its immediate dollar value. Carney has set a goal of doubling non-U.S. exports over the next decade. With 71.7% of Canadian merchandise exports still going to the United States in 2025, every credible new market reduces concentration risk at the margin—even if no single agreement can replace the scale of American demand.

Services and Digital Trade Expand the Deal Beyond Containers

The CEPA is not limited to physical goods. Its services provisions cover areas including environmental services, professional services, engineering and research and development, with Ottawa saying the rules will create greater predictability for suppliers operating across the two markets. It also includes temporary-entry commitments for eligible business visitors, intra-company transferees and their spouses, as well as certain service suppliers in sectors including engineering and information and communications technology.

Digital trade is another important component. The agreement includes commitments supporting cross-border data flows, restrictions on forced data-localization requirements, a prohibition on customs duties on electronic transmissions, and provisions involving personal-data protection and online consumer protection. Those rules matter for software developers, consultants, financial firms and other businesses capable of exporting expertise without shipping physical goods. The agreement also contains provisions covering financial services, telecommunications, intellectual property, small and medium-sized enterprises, labour, environmental issues and dispute settlement. Its eventual value therefore will not be measured only by tariff savings, but also by whether Canadian businesses find the broader commercial rulebook easier to navigate.

The Deal Still Has to Be Implemented—and It Has Limits

Signing is an important milestone, but it is not the finish line. The Canadian government expects the CEPA to enter into force in 2027, and some tariff reductions will be phased in over three to five years. Government procurement is also unfinished business: the current agreement contains transparency and cooperation provisions, but Canada and the UAE committed to begin negotiations on a more extensive procurement chapter no later than one year after the CEPA takes effect. Exporters will also need to satisfy rules of origin, certification and other requirements before claiming preferential tariff treatment.

The larger limitation is scale. Even a successful doubling of Canada-UAE trade would leave the relationship far smaller than Canada’s commercial relationship with the United States. Ottawa says the CEPA could help increase two-way trade from roughly $3.4 billion to $7 billion over the next decade—a meaningful expansion, but not a substitute for the hundreds of billions of dollars in goods exchanged with the United States each year. The more realistic significance is diversification by accumulation: more markets, more sources of investment and more routes for Canadian products. As the U.S. dispute continues, the UAE agreement gives Canadian companies another door to push open and Ottawa another building block for a less concentrated trading economy.

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