The Decibel - The trade war is heating up. So is foreign investment in Canada

Episode Date: September 9, 2026

With Canada’s countertariffs coming into effect on roughly $28-billion worth of U.S. goods on Tuesday, the trade war between Canada and the U.S. is heating up. With neither side indicating whether they plan to return to the negotiating table anytime soon, we wanted to look at how Carney’s goal to drum up foreign investment is going.Tim Shufelt is the Globe’s investment reporter. He’s here to talk about whether Carney’s bet on foreign investment is working, which sectors are seeing an increase in investments, and what this says about the resilience of Canada’s economy.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Tip for tat tariffs. This is the reality of the trade war between Canada and the U.S. right now. On Tuesday, Canada imposed counter tariffs ranging from 15 to 50% on about $28 billion of U.S. goods. This is in response to the U.S. imposing 50% tariffs on roughly the same dollar figure amount on Canadian goods late last month. As of Tuesday, neither side has given any indication they're returning to the table. any time soon. With this trade war ramping up yet again, we wanted to focus on how Canada is doing on the foreign investment front, and whether global investors are still interested in Canada despite the fight with the U.S., especially at a time when Prime Minister Mark Carney aims to, quote,

catalyze $1 trillion of new investment in the next five years. So today, we're talking to Tim Schufeldt. He's an investment reporter for the globe. He'll tell us whether Canada's bet on foreign investment is working, which sectors are seeing an increase, and what this all tells us about the resilience of Canada's economy. I'm Cheryl Sutherland, and this is The Decibel from the Globe and Mail. Hi, Tim, thanks so much for coming on the show. Happy to be here. Tim, this might be a simple question, but why do we need foreign investment in Canada? The government is aiming high.

Foreign money coming into Canada has always been a big part of developing our industry. and the government now wants to catalyze a trillion dollars in investment over the next five years, about half of that being private sector investment. The big pools of money that exist globally, I think we'd be foolish not to tap into that. So we're going to be talking about something called foreign direct investment. What is that? It's just when a foreign company or government takes an ownership stake in a Canadian company. There are a few different types of FDI.

Lately, it's mostly been mergers and acquisitions. So a foreign company that has a presence in Canada scooping up an existing asset. Okay, very interesting. So it's as straightforward as that. It's just foreign companies making investments into Canada. And there are also other types of foreign investment happening, like when foreign entities invest in things like the Canadian stock or bond market, right? Yes.

Okay. And we all know that Mark Carney has been pitching Canada as a dependable partner, right? Can you remind us briefly of how he's been doing that and where he's been focusing this energy? He's been on the circuit touring the world trying to sell Canada's untapped potential to global investors. He's signed deals with foreign governments, probably the strategic partnership with China being the most substantial of them. The problem he has is that seamless trade with the U.S. has long been one of Canada's greatest economic assets for decades, especially since NAFTA was signed in the 80s. And that's been one of the big attractions for foreign investors too when they're deciding whether or not to commit serious money to Canada. So the big question is what happens when you take away that preferential access to the world's biggest market?

Would foreign investors lose interest? Would they walk away? So Carney's job has been to try to convince the world that Canada is still a good place to invest, regardless of the fight that we now find ourselves in. And then, of course, we have the Canada Investing Summit coming up next. week, which will bring in some of the most powerful investors to Toronto. And one of the goals of that investment summit is to attract foreign investment into Canada, right? Yes, they have executives from BlackRock, JPMorgan Chase, coming in, some people who

control vast amounts of money. And the idea is to convince them that some of the barriers to investment that Canada has had in recent years are coming down, that the Carney government is committed to making this a hospitable place for foreign investment. Let's get into some numbers here to give us a sense of where we're at to where we are now. So broadly speaking, what did foreign investment look like before this trade war began 20 months ago? Over the last decade or so, investment numbers in Canada have been pretty bad across a broad range of readings. There are a lot of reasons for that, one of them being that the regulatory environment changed in Canada

and the desire to tap into our natural resource strength, those attitudes sort of changed over time. And we saw that reflected in the investment numbers, both in terms of the money coming into Canada, the appetite of foreign investors to get involved in big projects here, and in Canadian businesses themselves investing in their own operations. A lot of people attribute that to the Trudeau government's policies and their agenda, but it also has a lot to do with changes in the global energy market around 2015.

Prices tanked. And Canada also had the first round of Trump's presidency where we saw our relationship with the United States change substantially around the same time, around 2015. So the numbers, investing numbers in Canada have not been great for the last decade or so. But we have seen foreign direct investment spike recently in 2020. 25, the first year of Mark Carney's leadership, nearly 100 billion in incoming FDI came into Canada. And that's roughly up 60% from the 10-year average. Major jump.

Wow, that is a big jump. I wouldn't want to put too much stock in that number. This is an indicator that can bounce around a lot. But it at least suggests that foreign investors are still alive to Canadian potential. Okay. So this goal of $1 trillion in new investment over the next five years, this is a pretty lofty goal from the Prime Minister. Where are we at on that path to one trillion? It is a very ambitious goal.

And we're still in the very early days of trying to revive investor interest in Canada. But there are some signs that it's working. We touched on FDI. Portfolio flows into Canada too have been encouraging. There's still a ton of foreign investor interest in Canada's bond market, specifically government of Canada bonds. And we're seeing money flow into Canadian energy projects. which it's the goal of the prime minister to turn Canada back into a global energy superpower.

And we're seeing foreign investors taking interest in committing money to energy development in Canada again. Let's start with talking about the bond market then here. When I think of bonds, foreign investment doesn't necessarily come to mind there. I tend to think about investments into companies or resources versus government debt. So what's going on here? What's going on with the bond market? As I said, foreign investors love Canadian bonds, especially the last few years and into this year. In the first half of this year, total bond buying by foreign investors hit $185 billion, which is up nearly one half from the previous record pace.

There's demand from all over the world for Canadian bonds, most of it coming from the U.S. And there are a few aspects about Canada that fixed income investors like right now especially. We have lower inflation than the U.S. does. Inflation is very bad for bonds. And investors are drawn to that. And we also don't have the same concerns about Canadian government debt as they do in the U.S., which is running enormous budget deficits. So that too makes Canadian government bonds more attractive for the global investor.

I'm sure a lot of listeners will know that the bond market in the U.S. is kind of crazy right now. And I'm just wondering, like, can we say that what's going on with Canadian bonds is because people are attracted to Canadian bonds? or is this more about trying to get away from the U.S. bond market? That's definitely part of it. It's a strong diversification play for global investors to shift some resources to Canada and perhaps away from the U.S. There's a lot of volatility in U.S. treasuries right now. Their bond yields are spiking.

People are concerned about U.S. debt and deficits. So, yes, how we stand out in contrast to the U.S. is definitely part of this. Does that make an issue for, I guess, a longer, term play. Like, I'm just wondering, just because we're seeing foreign investment into the Canadian bond market now, will that change maybe in a certain amount of time, say, when people are less on edge about the U.S. market? I think global investors, the encouraging sign that we should take from their behavior is that they are looking through the Trump administration, at least when it comes to their attitudes toward Canada. The idea was to keep them interested in the Canadian

market despite what's happening with our relationship with the U.S. And there are signs that that is in fact what's going on. Okay. What about the stock market? What are we seeing with investments there? So the big global investors haven't always been as interested in Canadian stocks as they have been in bonds for the past four or five years. We've generally seen net outflows.

That factors in the behavior of Canadian investors too who have been buying U.S. stocks like crazy, despite all the boycott movements that we see. in the Canadian consumer sector. When you say net outflows, what does that mean? That means there's more money. Canadian investors are sending more money to the U.S. stock market than foreign investors are sinking money into the Canadian stock market. Okay.

That has reversed over the last year, though. Over the last 12 months, we've seen about $8 billion in net purchases of domestic equities. So the U.S. stock market has dominated the narrative in equity investing for several years, now, but Canadian stocks have actually upperformed U.S. stocks over the last year plus. So that probably doesn't hurt in terms of the appeal of Canadian equities for the global investor. And it's another sign that appetite for Canadian investments is still there. Yeah.

Do we have a sense as to why this is happening in the stock market in Canada? There have been some rotations of global money from expensive markets into cheaper markets. Canada is a much cheaper market than the U.S. is if you're looking at, you know, price to earnings ratios and that kind of thing. A lot of investors have taken profits on some of the big advances we've seen in the AI trade in American stocks. And Canada's been a beneficiary of some of that rotation, for sure. We'll be right back.

One thing you mentioned earlier where we're seeing foreign investment is in the resource sector. So let's get into that. What kind of foreign investment are we seeing there? So we are seeing the big players in U.S. energy committing serious money to Canadian oil and gas. This happens as Trump is trying to pressure the U.S. majors into getting involved in Venezuela, where they've taken control of, I think, a 65 billion barrels of oil. Almost none of them have shown any interest. And instead, as Andy Willis, our colleague wrote recently,

the U.S. energy giants are committing more money to Canada. KKR and Apollo to private equity players. They committed $2.7 billion recently to NBridge's natural gas pipeline. And ExxonMobil and CanocoPhillips, both big players in the Alberta oil sands, are putting money into their Canadian operations. There seems to be, even among the American industry, more interest in Canada than Venezuela. So it's really interesting what you're saying here,

because despite this deal that Trump has made with Venezuela to take control of its oil reserves, and he kind of used this as a threat to Canada that the U.S. has now has this alternative. But despite this, what you're saying is there are these U.S. businesses that are still interested in Canadian oil and gas. Yeah, the market just makes more sense from an investment perspective. The relationships are there. The industries are interconnected. U.S. refineries in the Midwest are specifically tooled to handle Canadian crude. The infrastructure exists in terms of pipelines.

It's a much more dependable market and the big producers in the U.S. It's an investment that they know and understand and they know that it works. So it sounds like what you're painting here, this picture, that it sounds positive when it comes to foreign direct investment. But are there downsides to an increase in this type of investment in Canada? Not all foreign direct investment is created equal. And in fact, a lot of the flows that we've seen recently this year, specifically have leaned toward mergers and acquisitions.

That's basically when a foreign company with a presence in Canada scoops up an existing asset. That does play into fears about foreign control of Canadian businesses. There could be reasons that these companies are making these moves now, not for the benefit of the Canadian economy. They might be trying to eliminate a competitor. They might end up cutting Canadian jobs. So the other kind of foreign direct investment that we would very much like,

to see is money that goes to new projects and new undertakings, not just scooping up existing assets. So that is the bulk of the spike in FDI that we've seen. So there is that caveat. We're happy that the direction is pointing up, but it doesn't put shovels in the ground. Right. At this point, we're not seeing these new projects, at least when it comes to foreign investment money. Yeah. Okay. So Canada has been seen historically as attractive to foreign investors because of its trade relationship with the U.S. and also just as a gateway, into the North American market, right? Like, just proximity-wise, it's a very attractive place.

How has the trade war changed that outlook? Right. So we are trying to convince the big global investors of the world of Canada's untapped potential at a time when our economic future has been thrown up in the air. And that's part of the point of this investment summit, to convince those investors that Canada is serious about fixing the barriers that have impeded investment in recent years. And this is part of Donald Trump's playbook.

He wants to make it so that investors will be reluctant to invest in Canada. That's something that he has played on in the past. And then on the other hand, we have Mark Carney trying to pitch Canada as the dependable partner, you know, in contrast to the chaos that we see in the United States under Donald Trump. So there's a lot riding on it. How do you drum up interest in the Canadian market at the time when one of our biggest assets has been thrown into question? But there are some very early signs that the turnaround is working that Carney is having some success in promoting Canada globally and spurring our own businesses to invest in growth. Do we have a sense as to why Canada is still attractive to foreign investment despite being a target in Trump's trade war right now? Well, we do still have access to the U.S. market, right?

Most of what flows across the border under the U.S.MCA agreement is being respected. It is moving tariff free. So preferential access and seamless trade has been called into question, but it still exists, at least as long as USMCA is being enforced. Canada has its own domestic market too, which, you know, we're a developed economy in our own right, which has appeal for foreign investors to. And then perhaps part of the puzzle here is the job that we're doing, selling Canada and our turnaround effort to the rest of the world.

Perhaps that's bearing fruit. There are some very early signs that it might be. I'm curious, though, given this moment that we're in, we're kind of in this ramp up stage of the trade war between Canada and the U.S., is there a breaking point where Canada is no longer attractive to foreign investments? What have you been hearing on that front? Yeah. I don't think so.

I think that there's only so much Donald Trump can do to isolate Canada, despite his desire to do so. The level of economic integration between the two countries, you can't just undo that without great cost to both parties. Again, I think global investors are looking through the chaos of the Trump agenda and seeing that Canada has an enduring relationship, trade relationship with the U.S. That will survive Donald Trump. And in the meantime, all the things that we're doing to diversify our economy, to build up exports to other countries, to develop our natural resources. Perhaps those are gaining traction as well.

So the undercurrent of these trade war discussions is this question of how do we make Canada a more resilient economy? At this point, Tim, what can we say about how resilient Canada is right now? I think everybody has been pleasantly surprised at how well we have held up, both in terms of economic growth, our stock market, our bond market. We did not fall into the sea, despite Trump's attempts to cut Canada off, perhaps, from the global investing community. We're seeing modest progress in terms of investing interest in Canada, the FDA that we talked about, portfolio flows, money coming into Canadian sectors. it's very early signs of a revival, but if you had have told us we'd be in this position

a year and a half ago when the trade war first started, I think any Canadian would take that. Tim, thank you so much for coming on the show. I really appreciate it. Happy to be here, thanks. That was Tim Schufeldt, an investment reporter for the globe. That's all for today. I'm Cheryl Sutherland.

This episode was edited and mixed by Rachel Levy McLaughlin. Our producers are Madeline White, Rachel Levy McLaughlin, and Mikhail Stein. Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor.

Thanks for listening.