Canada and Middle East Trade Opportunities Amidst Looming Trump Tariffs

Canada is shifting trade focus to the Middle East amid US tariffs, leveraging FTAs and investment agreements to expand in high-growth sectors like agri-food, renewable energy, and technology. Strengthening these partnerships can reduce reliance on the US and secure long-term economic stability.

By Sudhanshu Singh

In a world where economic alliances shift as swiftly as political tides, Canada finds itself at a crossroads. The re-election of Donald Trump and his commitment to protectionist trade policies have disrupted long-standing partnerships, leaving Canadian businesses searching for alternative markets. With 25 percent tariffs slapped on steel and aluminum exports, the Canadian government has responded in kind, imposing US$20.1 billion worth of retaliatory tariffs on US goods. While this tit-for-tat escalation threatens traditional supply chains, it has also set the stage for Canada to forge deeper economic ties with new partners—particularly in the Middle East and North Africa (MENA) region.

Canada already has Free Trade Agreements (FTAs) with Israel and Jordan and Foreign Investment Promotion and Protection Agreements (FIPAs) with Egypt, Jordan, Kuwait, and Lebanon. These trade frameworks provide a solid foundation for economic expansion, but with Middle Eastern economies diversifying beyond oil and investing heavily in agriculture, infrastructure, clean energy, and digital transformation, the opportunity for Canada to play a larger role in the region has never been greater.

The ripple effect of Trump’s tariffs

The impact of US tariffs on Canada has been immediate and far-reaching, creating ripple effects across multiple industries. Businesses that rely on American trade routes now face higher costs for raw materials, particularly in the manufacturing and automotive sectors. Canadian steel and aluminum exports have become less competitive, leading to supply chain disruptions affecting industries ranging from construction to consumer goods.

Moreover, the uncertainty surrounding long-term US trade policy has made Canadian exporters wary of relying too heavily on the American market. As a result, many companies are actively seeking partnerships beyond North America, with a particular focus on high-growth regions like the Middle East. The Canadian government, too, has ramped up diplomatic and commercial engagement with MENA nations, aiming to establish more predictable and mutually beneficial trade relationships.

Middle East: A rising trade destination for Canada

Key sectors for Canadian businesses in the Middle East

The Middle East presents significant opportunities for Canadian businesses across multiple industries. The following table outlines key sectors and their growth potential:

There are currently more than 150 Canadian brands operating in the UAE, and the country is home to over 40,000 Canadians, reflecting the deep-rooted economic and cultural ties between the two nations. As trade expands, these numbers are expected to rise, strengthening business opportunities further.

United Arab Emirates (UAE): A gateway to the Gulf

Among Canada’s Middle Eastern partners, the UAE stands out as a strategic economic hub. In 2021, bilateral trade between Canada and the UAE surged to US$2.5 billion, a 24.6 percent increase from the previous year. The UAE is more than just a market—it is a regional re-export hub that allows Canadian goods to reach Saudi Arabia, Bahrain, Oman, and beyond.

The UAE’s favorable business environment, advanced logistics infrastructure, and proactive economic policies make it an attractive destination for Canadian companies.

Key sectors where Canadian firms can thrive in the UAE include:

• Renewable energy, particularly solar and hydrogen partnerships;
• Technology and innovation, with growing demand for AI, cybersecurity, and fintech solutions;
• Aerospace and defense, given the UAE’s substantial military investments; and
• Financial and professional services, as Canadian banks and firms find increasing recognition in the Gulf.

Saudi Arabia: An economic transformation in progress

Saudi Arabia, with its Vision 2030 initiative, is undergoing a historic economic transformation. The Kingdom is investing heavily in smart infrastructure, clean energy, and education, presenting Canadian businesses with a multibillion-dollar opportunity. Despite previous diplomatic tensions, trade between Canada and Saudi Arabia remains strong and growing.

Sectors poised for expansion include:

• Smart infrastructure and construction, supporting Saudi Arabia’s urban megaprojects;
• Health care and pharmaceuticals, as the Kingdom aims to enhance its medical innovation capabilities;
• Education and vocational training, with a rising demand for partnerships in skills development; and
• Oil and gas technology exports, as Saudi Arabia modernizes its energy sector for efficiency and sustainability.

Egypt, Jordan, and Kuwait: Stable investment grounds

Canada’s Foreign Investment Promotion and Protection Agreements (FIPAs) with Egypt, Jordan, and Kuwait provide Canadian businesses with enhanced investment security and regulatory transparency. These agreements open doors for sectors such as agri-food exports, particularly wheat, pulses, and processed food products.

Additionally, Canada’s strength in engineering and infrastructure development aligns well with Egypt’s urban expansion projects, while Jordan’s push for renewable energy and technology adoption presents further opportunities.

Agri-food and seafood: Canada’s growing export advantage

The MENA region is one of the largest importers of agri-food and seafood products, with imports totaling CAD 183.9 billion (US$127.7 billion) in 2023. Canada has steadily increased its market share, with exports growing at an annual rate of 7.1 percent between 2019 and 2023.

In 2023, Canada maintained a trade surplus of CAD 2.6 billion (US$ 1.8 billion) in agri-food and seafood with MENA. The top imports from Canada included:

• Durum wheat, widely used in bread and pasta production;
• Lentils and pulses, meeting high consumer demand; and
• Soybeans, where Canada ranked fourth globally as a supplier to MENA.

The fastest-growing Canadian agri-food and seafood exports to MENA between 2019 and 2023 were:

• Frozen beef, increasing 33.5 percent annually;
• Corn, growing 15.2 percent annually; and
• Soybeans, with a 9.0 percent annual growth rate.

In 2023, Canada ranked eighth for wheat and meslin, 17th for frozen beef, 25th for corn, and 27th for food preparations as an import supplier to MENA. These figures highlight Canada’s rising potential in supplying high-demand agricultural commodities to the region.

Strategic factors shaping Canada-Middle East trade

Beyond economics, Canada’s engagement with the Middle East is also driven by geopolitical and logistical factors. The MENA region is home to critical global trade corridors, including the Suez Canal and the Strait of Hormuz, making it a pivotal hub for international commerce.

Canadian trade officials have prioritized ensuring supply chain stability by fostering relationships in key transit hubs and expanding trade agreements to hedge against US market volatility. Encouraging Canadian firms to invest in high-growth industries such as aerospace, clean technology, and advanced manufacturing is also a priority.

Barriers to entry: Challenges in MENA trade expansion

Despite its potential, shifting Canadian trade toward the Middle East is not without obstacles. Businesses entering MENA markets must navigate:

• Regulatory barriers, including varying import/export laws and licensing requirements;
• Geopolitical instability, which can pose risks for long-term investment security; and
• Cultural and business practice differences, requiring Canadian firms to adapt their approach to deal-making and partnerships.

To overcome these hurdles, companies should:

• Build strong relationships with local distributors who understand regional nuances;
• Engage with Canada’s Trade Commissioner Service, which offers regulatory guidance; and
• Participate in Middle East business forums to establish credibility and partnerships.

Policy roadmap: Strengthening Canada-Middle East economic ties

For Canada to fully capitalize on MENA trade opportunities, a coordinated policy approach is required. Key recommendations include:

1. Expand Free Trade Agreements (FTAs) with Gulf Cooperation Council (GCC) nations, ensuring tariff-free access to major markets;
2. Enhance trade finance options through export credit guarantees and risk mitigation tools to encourage business expansion;
3. Develop sector-specific trade missions, targeting renewable energy, aerospace, agri-food, and high-tech exports; and
4. Strengthen diplomatic engagement by fostering bilateral trade councils and investment partnerships.

Way Ahead

The escalating trade tensions between Canada and the US, fueled by Trump’s protectionist tariffs, have created an urgent need for economic diversification. As traditional trade routes become less stable, Canada must act decisively to broaden its global footprint.

By leveraging existing trade agreements, deepening engagement with Middle Eastern economies, and strategically positioning itself in high-growth sectors, Canada can reduce its dependence on the US while securing long-term economic stability. The next decade presents a crucial turning point, where proactive trade policies and stronger Middle East partnerships could define Canada’s global economic trajectory for years to come.

(US$1 = CAD 1.44)

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