91�����

For Canadian exporters, the world’s longest undefended border is beginning to feel increasingly fortified. The Trump administration’s second term has ushered in a wave of tariffs, tightened border protocols, and an “America First” procurement doctrine that privileges domestic suppliers at the expense of North American partners. For decades, the United States has served as Canada’s primary export market—a gravitational force pulling goods, services, and capital southward. That pull is weakening.

With predictability eroding and profitability under threat, Canadian firms face a stark choice: wait for cooler heads to prevail in Washington, or redirect their gaze elsewhere.

Across the Atlantic, opportunity beckons. The European Union and the United Kingdom offer high-income consumers, relatively stable regulatory frameworks, and—thanks to the Comprehensive Economic and Trade Agreement (CETA) and the UK-Canada Trade Continuity Agreement—a favourable tariff environment. These may be harder markets to penetrate, but they are less prone to political mood swings.

Now may be an opportune moment to make the leap. Europe’s economic prospects are brightening. Germany’s recently announced fiscal reforms are expected to ripple across the bloc, bolstering demand and narrowing growth differentials with the US. Unlike their American counterparts, EU and UK policymakers are not treating trade policy as a weapon of domestic politics. For Canadian firms seeking less volatile commercial relationships, that matters.

A pivot, however, will not be painless. Success in Europe and the UK requires careful adaptation. Market research is paramount: local tastes, price sensitivities, and entrenched competitors make cookie-cutter strategies ineffective. Both jurisdictions impose formidable regulatory hurdles, including REACH for chemicals, CE markings for manufactured goods, and GDPR for data handling. Compliance is essential and often best handled by local experts.

Logistics must also be rethought. Shipping times are longer, costs higher. Yet the loonie’s weakness against the euro and pound provides a natural price advantage that can soften the blow. Firms with pricing power can use this asymmetry to gain a foothold.

Relationships, too, need to be built from the ground up. Representation, be it through agents, distributors, or subsidiaries, can speed market entry. Canadian trade missions regularly support attendance at regional fairs and expos, which can help to grease the wheels of commerce.

Financially, the transition demands discipline. Canadian firms selling into the euro area and the UK will find themselves exposed to currency fluctuations that can swiftly erode margins or distort pricing strategies. Unlike the relatively stable USD-CAD corridor, the euro and pound tend to exhibit greater volatility—amplified by fragmented monetary policies, divergent growth paths, and geopolitical shocks. For firms operating on tight margins or long order cycles, this volatility is not just a nuisance—it’s a serious risk.

Effective hedging is no longer optional; it is a prerequisite for serious participation in overseas markets. But done well, it need not be merely defensive. Sophisticated currency management can become a strategic advantage. Forward contracts and options, used judiciously, allow firms to price in buyers’ local currencies with confidence, providing them with transparency and predictability. This can be particularly appealing in business-to-business transactions, where European or British customers may prefer—or demand—invoicing in euros or pounds.

Moreover, firms that integrate currency strategy into procurement, pricing, and financial planning can differentiate themselves from competitors who treat FX as an afterthought. Engaging with providers who offer tailored risk management solutions, rather than cookie-cutter products, can yield meaningful cost savings and allow firms to better align hedging with operational cash flows. In a world where margin pressures are relentless, that edge may prove decisive.

Multi-currency accounts can also offer significant operational advantages. By using euros and pounds, Canadian exporters can reduce the number of conversions required, sidestep adverse exchange-rate movements during settlement, and invoice customers in their preferred currencies without incurring unnecessary friction. This capability not only improves cash flow management but can also serve as a selling point in negotiations with European buyers. As trade relationships deepen, so too does the value of having the financial infrastructure to support them.

Institutions such as Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) provide useful tools for insuring receivables, researching customers, and accessing working capital.

This is not a short-term fix. Building sustainable export channels into Europe and the UK will take time, resources, and strategic patience. But even if trade tensions across the 49th Parallel eventually subside, the long-term benefits of diversification—greater stability, exposure to higher-value markets, and insulation from Washington’s whims—could make the pivot both prudent and potentially profitable.

Karl Schamotta

Chief Market Strategist