TD Economics pegs the shortfall at nearly $60 billion, with energy accounting for $50 billion of it
Canadian goods exports to the European Union could run nearly $60bn higher under certain conditions, with roughly $50bn of that in energy.
TD Economics released the estimate last Wednesday the day before Prime Minister Mark Carney opened a Canada-EU summit in Montreal.
The EU takes 5 to 6 percent of Canadian international merchandise exports, about the same share as the UK and China which valued 2025 shipments at $43bn, or around one percent of EU imports.
Crude oil, aircraft, aluminum, uranium, iron, canola, nickel and diamonds account for most of that trade.
Canada ran a $50bn goods trade deficit with the EU in 2025, importing pharmaceutical products, automobiles and medical instruments.
“These barriers notwithstanding, Canada is well positioned to increase its market share in the EU,” wrote TD economists Vikram Rai and Rishi Sondhi, naming regulatory barriers, geography and established commercial relationships with other trading partners as the constraints.
Their product-level analysis of 5,000 categories screened goods in which Canada holds a revealed comparative advantage against products the EU relies on imports to supply.
The Comprehensive Economic and Trade Agreement (CETA) eliminated tariffs on 98 percent of goods products, the report said. Ten of 27 EU members, including France and Italy, have not fully ratified the agreement, and TD said provisional application has kept nearly all trade tariff-free while the gap may discourage long-term investment in Canada-EU supply chains.
Canada and the EU agreed to “ever closer association” in a joint declaration seen by Reuters, dropping the proposal to make Canada an associate member.
Germany led a group of member states that argued they could not sign up to a concept with no legal status, diplomats told Reuters, and the declaration leaves the relationship to be defined at another summit next year.
The statement also contains a joint initiative on “new subsea cable infrastructure” between Europe, Canada and Asia, a joint feasibility study on Canadian liquefied natural gas exports to Europe, and provisions allowing young Canadians and Europeans to work across the Atlantic, per Reuters.
AP News reported European Commission President Ursula von der Leyen told the summit that EU imports of Canadian critical raw materials rose 62 percent last year to €3.3bn ($5.18bn). The materials include lithium, cobalt, nickel and graphite.
Canada is the only non-European country participating in the EU’s €150bn Security Action for Europe defence procurement instrument, the European Council said.
Canada ships nearly 70 percent of its exports to the US, Reuters reported, while the EU accounts for about 9 percent of Canada’s total trade.
“Canada’s effort to be closer friends with the EU is very ill-defined,” Julian Karaguesian, a former adviser at Canada’s Finance Ministry, told Reuters, saying increased collaboration would not necessarily deliver the diversification Carney is pursuing.
Rai and Sondhi wrote that “stronger demand, greater Canadian capacity and better market access, not a one-off diversion of trade,” could make Europe a meaningfully larger export market.
