Former U.S. Ambassador Warns Canadian Businesses: Stop Betting on Relations With America Going Back to Normal

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For generations, Canadian businesses could build long-term plans around one unusually dependable assumption: the United States would remain Canada’s closest, most accessible and most deeply integrated economic partner. Former Canadian ambassador to Washington Kirsten Hillman is warning that companies should no longer treat that old relationship as something that will automatically return.

Speaking at the Global Business Forum in Banff, Alberta, Hillman said she has been surprised by business leaders who still expect the turbulence in Canada-U.S. relations to eventually settle down. Her message was not that the two economies are about to separate. Their connections remain enormous. Rather, she argued that businesses need to prepare for a relationship shaped by greater American economic self-interest, repeated trade disputes and far less certainty about the rules that once seemed permanent.

Hillman Says Waiting for the Old Relationship Could Be a Mistake

Hillman’s warning carries unusual weight because she spent years working at the centre of Canada’s most important bilateral relationship. Appointed ambassador to the United States in 2020, she became the first woman to hold that position. Her previous work also included major trade negotiations, including roles connected to the agreement that became CUSMA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. She left the Washington post in 2026 when Mark Wiseman became Canada’s new ambassador.

At the Banff forum on September 24, Hillman said she had recently encountered business leaders who believed Canada-U.S. relations would eventually settle back into something resembling their previous form. She challenged that assumption. Canadians, she said, have traditionally presented the deep integration of the two economies as an obvious benefit to both countries. Hillman’s assessment was that this argument does not carry the same persuasive power with President Donald Trump’s administration. She also suggested the shift toward greater U.S. economic self-interest reaches beyond one president, making it risky for businesses to treat current tensions as merely temporary.

Decades of Integration Created Enormous Advantages — and Dependence

It is difficult to overstate how closely the Canadian and American economies remain connected. Canadian government figures show the two countries exchanged roughly $3.5 billion in goods and services every day in 2025. Even after the tariff battles that began changing trading patterns, more than 85 per cent of Canada-U.S. merchandise trade continued to move tariff-free under CUSMA. Geography, infrastructure and decades of investment have created commercial connections that would be extraordinarily expensive to reproduce elsewhere.

That integration also explains why sudden changes in Washington can have such an outsized effect in Canada. In 2025, approximately 72 per cent of Canadian merchandise exports still went to the United States. The share was lower than the 75.9 per cent recorded in 2024, but America remained dominant by a huge margin. For an Ontario parts supplier, Alberta energy producer or Quebec aluminum smelter, finding another international customer is not necessarily equivalent to replacing an American one. Distance, shipping expenses, regulations and established supply chains all matter, which is why Hillman’s warning is about reducing vulnerability rather than simply abandoning the U.S. market.

The Latest Tariff Escalation Shows How Quickly the Rules Can Change

The trade environment confronting businesses in 2026 provides a clear example of the uncertainty Hillman was describing. The Trump administration used Section 338 of the Tariff Act of 1930 to impose additional duties of 50 per cent on specified Canadian products. After a brief suspension of the effective date, those measures took effect on August 22. The White House described the action as a response to what it considers discriminatory Canadian policies affecting American commerce.

Ottawa disputes Washington’s characterization of the trade relationship and responded with additional countermeasures. The federal government estimated that the latest American tariffs covered $27.6 billion worth of Canadian goods and announced matching Canadian tariffs on $27.6 billion of American imports. Those counter-tariffs took effect September 8 at rates of 15, 25 or 50 per cent depending on the product. Steel, aluminum, dairy, appliances, agricultural equipment and other goods were among the affected categories, while earlier Canadian counter-tariffs on American automobiles remained in place. For companies making investment decisions years in advance, that pace of policy change makes waiting for certainty increasingly difficult.

CUSMA Still Protects Trade, but Its Future Has Become Less Predictable

CUSMA has not disappeared. The trade agreement entered into force on July 1, 2020, replacing NAFTA and establishing rules for a North American market of more than 500 million people. Importantly, the 2026 review was never an automatic expiry date. The agreement remains in force until 2036 unless events under its terms change that trajectory. That provides businesses with a significant legal framework even while political disagreements continue.

What changed on July 1, 2026, was the level of certainty surrounding its long-term extension. During the mandatory six-year joint review, the United States declined to renew the agreement in its existing form. U.S. Trade Representative Jamieson Greer’s office said Washington would continue talks with Canada and Mexico over what it considers shortcomings in the agreement. Canada, meanwhile, has emphasized that CUSMA remains fully operational and says it wants the agreement renewed. For corporate planners, the distinction matters: continental trade still has rules, but companies can no longer assume those rules will remain untouched simply because the existing system has worked for decades.

Canadian Companies Are Already Changing How They Operate

Evidence from the Bank of Canada suggests the adjustment Hillman is advocating has already begun. Businesses responding to trade tensions have altered sourcing strategies, changed shipping arrangements and looked for customers outside the United States. In a September speech examining how firms are adapting, the Bank said non-energy exports rose about 14.5 per cent in the second quarter of 2026, reaching their strongest level since early 2025. Officials cautioned that temporary factors contributed to the increase, but business outreach also pointed to deliberate efforts to reduce tariff exposure.

Statistics Canada data provide another sign of that shift. In July, Canadian exports to countries other than the United States climbed 7.4 per cent to a record $25.6 billion. Those markets accounted for 33.7 per cent of merchandise exports during the month. At the same time, exports to the United States dropped 6.6 per cent. One month cannot establish a permanent restructuring of Canadian trade, but the numbers show that diversification is no longer merely a political slogan. Companies are testing alternative markets in measurable ways.

Exporters Are Looking Harder at Europe and Asia

Export Development Canada’s latest Trade Confidence Index shows how widespread diversification plans have become. In a survey conducted between June and July 2026, 72 per cent of Canadian exporters said they intended to enter new markets during the next two years. That was up from 65 per cent only months earlier. Europe was identified as an attractive destination by 31 per cent of respondents, while 20 per cent pointed to the Asia-Pacific region.

Those plans do not mean the United States is becoming irrelevant. EDC found that 81 per cent of surveyed exporters were still active in the American market, reflecting its proximity and established commercial connections. Instead, businesses appear increasingly interested in adding customers rather than simply replacing one country with another. Canada’s existing trade agreements offer options: CETA provides preferential access to the European Union, while the CPTPP connects Canadian companies with markets around the Pacific. Global Affairs Canada’s State of Trade 2026 report found that non-U.S. markets reached 32.8 per cent of Canadian exports in 2025, the highest share in more than four decades. Diversification has begun, but dependence remains substantial.

Some Industries Cannot Diversify Nearly as Easily as Others

The practical difficulty with reducing American exposure becomes obvious in industries built around continental supply chains. Bank of Canada analysis found that industries facing sector-specific U.S. tariffs represented roughly 15 per cent of Canadian exports. By early 2026, Canadian steel exports had fallen sharply, while softwood lumber exports were roughly 20 per cent below their 2024 average. Aluminum producers responded partly by shifting toward products that were not subject to the same tariffs.

Automotive manufacturing presents an even more difficult challenge. Statistics Canada reported that more than 93 per cent of Canadian motor vehicle exports went to the United States in its recent analysis of the sector. Vehicles and parts can cross the border several times during manufacturing, making the industry fundamentally different from a company selling software internationally. Canadian motor vehicle exports to the United States fell 9.6 per cent in 2025, while shipments to other countries increased 14.6 per cent. The growth outside America was notable, but starting from such a small base means alternative markets cannot quickly replace U.S. demand.

Uncertainty Can Hurt Even Before a Tariff Hits a Company

One of the less visible costs of a trade dispute comes from decisions that businesses postpone. A company does not need to receive a new tariff bill before uncertainty changes its behaviour. Executives considering a new factory, additional machinery or another round of hiring have to estimate where their products will be sold several years into the future. When tariff rates and trading rules can change unexpectedly, delaying an investment can become the safer financial decision.

Bank of Canada research has repeatedly identified that channel. Its 2026 assessment of Canada’s potential output projected growth in potential output slowing from 2.3 per cent in 2025 to 1.2 per cent in 2026, citing slower population growth alongside U.S. tariffs and trade-policy uncertainty. Business surveys have also found that uncertainty continues to affect investment plans for part of the corporate sector, even as overall investment intentions have shown improvement. The Bank has stressed that Canadian firms are adapting rather than simply retreating. That distinction is important: Hillman’s warning does not necessarily imply an economic rupture, but it does reinforce the value of planning for volatility as a lasting business condition.

Self-Reliance Is Starting to Show Up in Corporate Strategies

Hillman’s emphasis on Canadian resilience has parallels in what exporters say they are actually doing. EDC’s September survey found that companies responding to weaker U.S. demand were taking several approaches at once. Twenty-nine per cent reported increasing domestic sales, 22 per cent were sourcing more locally and 19 per cent were expanding into additional export markets. Two-thirds of respondents were already investing in Canada, while another 18 per cent said they planned to make domestic investments.

Governments and public institutions have also expanded programs intended to help companies adjust. EDC’s Trade Impact Program was launched with up to $5 billion in additional financing and insurance capacity, with nearly $3 billion deployed by late August 2026. Ottawa has also established the Canada Strong Diversification Fund for businesses facing significant effects from American tariffs. None of those programs can remove the basic economics that make the United States attractive to Canadian exporters. They can, however, make it easier for some firms to finance equipment, strengthen supply chains or pursue customers elsewhere rather than simply waiting for bilateral tensions to disappear.

A Different Relationship Does Not Necessarily Mean a Broken One

Perhaps the most important part of Hillman’s message is what it does not say. She did not argue that Canadian companies should stop trading with Americans or that the two countries are destined for permanent economic separation. She noted that Americans continue to have considerable respect for Canada while emphasizing that U.S. decision-makers ultimately prioritize American interests. Her argument was that Canadians should understand that reality more clearly and build enough resilience to make decisions based on their own interests as well.

Christopher Sands of Johns Hopkins University’s School of Advanced International Studies, appearing at the same Banff forum, described the moment as an opportunity for a “re-founding” of Canada-U.S. relations involving more self-reliant countries. The economics suggest continued interdependence is likely to remain powerful: billions of dollars still move across the border every day, and most bilateral merchandise trade remains tariff-free. What businesses can no longer safely treat as guaranteed is the degree of political predictability surrounding that commerce. The emerging lesson is less about turning away from America than making sure a Canadian company’s future does not depend entirely on America returning to the relationship it once knew.

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