Check the labels on your clothes, your phone and the fruit in your fridge, and you will find places all over the world. Canada also sends its products everywhere: wheat, lumber, cars and car parts, energy, seafood, maple syrup and much more. Trade gives Canadians more choice and gives Canadian businesses more customers. But markets do not always work fairly on their own, so governments and other organizations set rules to protect buyers, workers and the environment.
Imports, exports and why countries trade
An export is a good or service sold to buyers in another country. An import is a good or service bought from another country. Countries trade because no country can make everything well or cheaply. Canada cannot grow bananas or coffee, so it imports them. Canada has huge forests, farmland and energy resources, so it exports lumber, grain and energy. When each country focuses on what it does best and trades for the rest, both sides usually end up with more and cheaper goods than if they tried to make everything themselves.
Canada's trade relationships
The United States is by far Canada's largest trading partner: most of what Canada exports goes there. A free trade agreement is a deal between countries to cut or remove tariffs and other barriers to trade. A tariff is a tax on imported goods. Canada belongs to several major agreements:
| Agreement | Partners | What it does |
|---|---|---|
| CUSMA (Canada–United States–Mexico Agreement) | The United States and Mexico | Replaced NAFTA in July 2020; sets the rules for trade among the three countries. Goods that meet its rules were traditionally tariff-free, but since 2025 the U.S. has placed tariffs on many Canadian goods, such as steel, aluminum, autos and lumber, even when they meet CUSMA rules. |
| CETA (Comprehensive Economic and Trade Agreement) | The European Union | Removed tariffs on most goods traded between Canada and the EU |
| CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) | A group of mostly Asia-Pacific countries (including Japan, Australia and Vietnam; the U.K. joined in 2024) | Cuts tariffs and opens markets in the Asia-Pacific region |
- Bigger markets: a small Canadian maple-syrup producer can sell to millions of customers in Europe or Japan without paying high tariffs.
- More competition: Canadian businesses face foreign rivals selling into Canada, which pushes them to cut costs and improve quality, and gives consumers lower prices.
- Cheaper inputs: a Canadian furniture maker can import parts or materials at lower cost.
- Tariffs and trade disputes: when a trading partner puts tariffs on Canadian goods, those goods cost more for foreign buyers, so Canadian exporters can lose sales and jobs.
Here is how a tariff changes a price. Suppose an imported pair of sneakers costs a store $80 and a 25% tariff applies. The tariff is , so the store's cost rises to $100. That makes locally made sneakers more competitive, but it also means shoppers pay more.
Market failures and why government steps in
A market failure happens when a free market, left alone, produces a result that is bad for society. Common examples: one company becomes so powerful that it can charge whatever it likes (a monopoly); businesses agree secretly to keep prices high (price-fixing); a factory pollutes a river and nobody pays for the damage; products are unsafe or ads are misleading; or workers are paid too little to live on. Governments, and some non-governmental organizations, intervene to correct these problems.
| Level or body | Examples of how it intervenes |
|---|---|
| Federal government | The Competition Act, enforced by the Competition Bureau, bans price-fixing and misleading advertising and reviews big mergers; federal product-safety rules and recalls; the federal minimum wage for federally regulated workplaces such as banks and airlines |
| Provincial government (Ontario) | Ontario's general minimum wage and employment standards; consumer protection laws on contracts, refunds and unfair practices; workplace health and safety rules; environmental rules |
| Municipal government | Business licences, zoning bylaws that say where a business can operate, local property taxes, and public health inspections of restaurants |
| Non-governmental bodies | The Better Business Bureau, a non-profit that rates businesses and handles complaints; standards bodies such as CSA Group that test and certify product safety; industry associations with codes of conduct, such as Ad Standards for advertising |
Governments also use money to steer markets. A tax on something society wants less of, such as tobacco, raises its price so people buy less. A subsidy is money a government gives to a business or a person to make something cheaper or more attractive, such as a grant for a company that hires students for the summer or a rebate for making a home more energy efficient. Regulators are government agencies that set and enforce rules for a specific industry; for example, the CRTC regulates broadcasting and telecommunications, including the companies that sell phone and internet service. Notice the difference: the Competition Bureau and the CRTC are government agencies with legal powers, while the Better Business Bureau and Ad Standards are independent non-profit organizations that rely on businesses agreeing to follow their codes.