Europe offers Canada $57 billion export opportunity, but energy dominates: TD Economics

Canada could expand annual goods exports to the European Union by roughly $57 billion, but almost 90 per cent of that potential lies in energy and would require major new infrastructure, according to TD Economics.

The October 28 report identifies Europe as a meaningful opportunity for Canadian trade diversification while warning that stronger political relationships and tariff agreements cannot, by themselves, deliver a substantial increase in sales.

Economists Vikram Rai and Rishi Sondhi estimate approximately $51 billion in additional energy exports and $6 billion in other goods under a scenario aligning Canadian sales with Europe’s share of global imports.

Their estimate measures market potential rather than forecasting future exports. Capturing it would require overcoming constraints on production, transportation, export capacity and market access.

The distinction matters as Canada seeks alternatives to its longstanding dependence on American customers. Europe offers a large market, but Canadian businesses begin with a relatively small foothold.

Canada shipped approximately $43 billion in goods to the EU in 2025, representing only 5–6 per cent of Canadian merchandise exports. Canada supplies around 1 per cent of EU goods imports.

Energy dominates the estimated opportunity

TD examined nearly 5,000 product categories, looking for an overlap between goods Canada exports competitively and products Europe relies on imports to obtain.

For products where Canada demonstrated a comparative advantage, the economists applied the EU’s share of global imports to Canada’s worldwide exports of the same goods.

That calculation produced the additional $57 billion estimate. It does not demonstrate that European buyers would purchase those volumes from Canada at commercially viable prices.

The report says energy gains cannot be achieved without major new export and energy infrastructure. It identifies the proposed Ksi Lisims LNG terminal in British Columbia, which has attracted European offtake agreements, as an example of investment needed to expand capacity.

The benefits would also vary considerably by province. The EU already takes more than 40 per cent of Newfoundland and Labrador’s international goods exports, supported by crude oil, iron and nickel.

Europe accounts for 11 per cent of Quebec’s exports, with aluminum and aircraft important contributors. Its share averages only about 3 per cent across Ontario, Manitoba, British Columbia, Alberta and New Brunswick.

Tariff removal leaves other barriers

The Canada–EU Comprehensive Economic and Trade Agreement eliminated tariffs on 98 per cent of goods categories. Regulatory differences, certification requirements and transportation costs continue to restrict commerce.

Canadian exporters must establish that their products satisfy CETA’s rules of origin, a potentially costly process when manufacturers use components from multiple countries.

Food standards also affect access. The report cites Europe’s ban on hormone-treated beef, which requires Canadian producers serving that market to use different production and processing arrangements.

European suppliers encounter Canadian obstacles, including agricultural quotas and provincial restrictions in regulated markets.

Geography favours Atlantic exporters, while western and inland producers face additional domestic shipping costs. Established American customers and supply chains continue to reinforce Canada’s existing trade patterns.

Manufacturing and services offer broader possibilities

TD identifies defence, critical minerals, digital markets and financial services as longer-term opportunities where Canadian capabilities overlap with European strategic priorities.

Europe’s defence expansion could generate demand for Canadian aerospace, communications equipment and advanced manufacturing. Canada’s participation in the Security Action for Europe framework improves access to procurement opportunities.

Critical minerals offer potential beyond extraction, including processing, refining and advanced materials. Realizing those gains depends on developing supply chains that remain incomplete.

Europe’s expansion of artificial intelligence and data-centre capacity could also create business for Canadian technology and service providers. However, TD cautions that European investment totals include construction and other local spending unavailable to foreign exporters.

Services face fewer geographical constraints. Canada exported $22 billion in services to the EU in 2024, approximately 60 per cent of it commercial services such as consulting, finance and insurance.

Services exports increased more than 80 per cent between 2017 and 2024, although most growth occurred before 2020 and momentum subsequently slowed.

Investment commitments need to become operating projects

TD also questions how much new foreign investment was represented by nearly $500 billion in commitments announced at September’s Canada Investment Summit.

Much of the total reflected Canadian financial institutions’ financing targets and domestic corporate projects rather than completed foreign transactions.

The summit’s more durable contribution may have been presenting 167 projects worth approximately $327 billion to investors from nearly 30 countries.

Those projects span minerals, clean energy, digital technology, advanced manufacturing and transportation, closely matching European priorities.

For Canada, converting that alignment into exports requires securing investors and customers, obtaining approvals, building capacity and easing procurement and certification barriers.

Europe can become a meaningfully larger Canadian export market, the report concludes. Delivering that outcome will require sustained commercial and industrial development after the summit announcements.

The report therefore presents diversification as a sustained investment challenge requiring cooperation between both economies.

End Note: Related Energi Media Video Interviews

• Canada–EU Summit Must Turn Ambition Into Investment — Patrick Leblond on investment certainty, critical-mineral supply chains, defence procurement and trade barriers.
• Can Canada and Europe Build New Industries Together? — Aaron Cosbey on green iron, mineral refining and building Canadian industrial capacity with European partners.
• Ontario, Quebec Manufacturing Sectors Decimated Since 2000 — Jim Stanford on manufacturing decline and why Canada needs to diversify what it produces as well as its export markets.