State of the World

North America

Canada-Mexico relations

Background

Canada has a multifaceted relationship with Mexico, focused on trade and people-to-people ties. Mexico is also an influential continental player. President Claudia Sheinbaum took office in October 2024. She won the election with the highest vote percentage in Mexico's democratic history (59.7%) and is advancing a policy agenda that includes constitutional and legislative reforms and austerity measures, as well as a foreign policy grounded in principles of neutrality and non-intervention.

Canadians are the second-largest category of tourists in Mexico after Americans. In 2024, over 2.6 million Canadians visited the country. The number of Mexicans visiting Canada is also increasing (590,000 Mexicans travelled to Canada in 2023).

In 2024, Mexico was Canada's third-largest merchandise trading partner, after the U.S. and China, with a trade value of $55.6 billion. Canada was the third-largest source of foreign investment in Mexico, with stocks of $40.4 billion in 2023. Mexico was the U.S. top merchandise trade partner in 2023 and 2024.

Mexico is party to both the Canada-U.S.-Mexico Agreement (CUSMA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

In 2023, over 59,500 temporary Mexican workers came to Canada, with over 26,500 arriving through the Seasonal Agricultural Workers Program (SAWP), contributing to Canada’s food security and returning $1.25 billion in remittances to Mexico. This program is up for expansion and modernization in 2025.

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Canadian position

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Given Mexico’s proximity to Canada and existing business-to-business ties, Mexico is an important market for Canadian exporters in their efforts to diversify. [ * ]

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To combat illegal drugs, Canada has been cooperating with Mexico and the U.S. through multiple bilateral, trilateral, and multilateral forums, including the Trilateral Fentanyl Committee, the Global Coalition to Address Synthetic Drug Threats, the North American Drug Dialogue (NADD), and the Canada-U.S. Opioids Action Plan.

Canada collaborates closely with Mexico in multilateral fora including the G20, Organization for Economic Co-operation and Development (OECD), the Americas Partnership for Economic Prosperity (APEP), and has historically benefited from high-level trilateral engagement at the North American Leaders Summit (NALS). NALS X was held in Mexico City in January 2023. Canada is due to host NALS XI.

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Mexican position

President Sheinbaum’s priorities include poverty reduction, women’s and Indigenous people’s rights, education, environment and climate change, energy infrastructure, and promoting science and technology. She is pursuing “Plan Mexico,” a medium-term economic development strategy that aims to strengthen industrial capacity, promote private investment, and increase local content in global supply chains.

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Upcoming events, decision points and urgent issues

In 2025, Canada will host the NADD (Director-General level) and the Trilateral Fentanyl Committee (co-chaired by the National Security and Intelligence Advisor).

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FIFA Men’s World Cup will be held jointly in the U.S., Mexico, and Canada in 2026.

Canada-United States-Mexico Agreement (CUSMA)

Background

The Canada-United States-Mexico Agreement (CUSMA) came into force on July 1, 2020, for a sixteen-year term. In addition to preserving the core of the North American Free Trade Agreement (NAFTA), which eliminated virtually all tariffs between Canada, the United States and Mexico, it includes new chapters on good regulatory practices, customs administration, North American competitiveness, and small and medium-sized enterprises. It modernizes disciplines for trade in goods and agriculture and for rules of origin, such as those for passenger vehicles and trucks.

CUSMA is the foundation for integrated North American trade and investment and has helped fuel robust North American intra-regional trade growth, including following the shocks of the global pandemic. In 2023, trilateral merchandise trade amounted to $1,925 billion (or $1.9 trillion), a 30.4% increase ($448.5 billion) since CUSMA entered into force.

The state-to-state dispute settlement mechanism in CUSMA is an improvement over its predecessor in that it requires the Parties to agree on a roster to facilitate the creation of panels and ensures that panels are established automatically upon request. Almost all of the obligations in the Agreement, including those related to labour and the environment, are now subject to this dispute settlement mechanism.

CUSMA includes a commitment to jointly review CUSMA, starting on the sixth anniversary of its entry into force, a forum that also provides the opportunity for the Parties to extend the Agreement term for another 16 years. Should there be no consensus to extend the Agreement’s term in 2026, the next joint review would be held the following year, in 2027, and so on every year until 2036. During each annual review, the Parties will be given the opportunity to extend the Agreement for a new 16-year term. Should there be no consensus to extend the Agreement by 2036, the Agreement will expire. [ * ]

In his America First Trade Policy Memorandum issued on January 20th, President Trump instructed the United States Trade Representative (USTR) to initiate domestic consultations regarding CUSMA, assess the impact of the Agreement on the United States, and then report back on its findings by April 1, 2025, including a recommendation on whether the United States should continue to participate in the Agreement.

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Global Affairs Canada has already conducted its own public consultations in the Canada Gazette, engaged provincial and territorial governments through the CUSMA Consultative Committee, and led interdepartmental coordination in preparation for the review. Officials will continue consultations and engagement with provincial and territorial governments, stakeholders and Canadians on Canada's interests and priorities, to help inform next steps regarding the CUSMA joint review, including engagement with our CUSMA partners.

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Europe

Canada-European Union relations

Background

The European Union (EU) is a strategic partner for Canada, and a major geopolitical player due to its economic power, political influence, and global leadership. With 27 Member States, a population of over 448 million, and a single market that facilitates the free movement of goods, services, capital and people, the EU's collective economic and political clout is considerable.

As one of the world's largest integrated economic spaces, the EU wields substantial influence in trade and economic policies. Politically, it defends democracy, human rights, and the rule of law, using its diplomatic and economic leverage to support these values globally. [ * ]

The EU is a global driver and setter of regulations and standards across many sectors. [ * ]

The Canada-EU relationship is formalized by two framework treaties: The Canada-EU Strategic Partnership Agreement (SPA), which provides a framework to strengthen cooperation on a wide range of issues such as international peace and security, and the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which is currently provisionally applied due to failure by some member states [ * ] to complete domestic processes. Despite this, almost all aspects of the treaty are currently being applied.

Canada-EU cooperation spans a wide range of areas, including trade, security, innovation, and migration. Canada and the EU work closely together to address global crises such as the ongoing war in Ukraine, climate change, and challenges posed by emerging technologies.

Leaders’ Summits between the Prime Minister of Canada and the Presidents of the European Council and of the European Commission are mandated by the SPA. These meetings review the dynamic EU-Canada relationship, including on foreign and security policy, and chart the way ahead. They typically take place at approximately 18-month intervals. Canada hosted the last Summit in November 2023 in St. John’s. While Prime Minister Trudeau visited Brussels to meet with European Council President António Costa and European Commission President Ursula von der Leyen in February 2025, this was not considered a formal Summit.

Senior official and expert meetings take place throughout the year to discuss a range of issues and themes in greater depth. A multitude of formal and informal bilateral consultations also occur on the margins of other international fora. This comprehensive institutional framework positions the Canada-EU bilateral relationship as one of Canada's most well-structured partnerships on the global stage.

Canadian position

The Canada-EU partnership has gained in importance in the face of the current geopolitical instability exacerbated by [ * ] the ongoing war in Ukraine, the fragile situation in the Middle East, [ * ]. In particular, enhanced trade and investment and energy cooperation is increasingly important. [ * ]

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Upcoming events, decision points and urgent issues

European Council (EUCO) meeting, March 20-21, 2025.
G7 Leaders’ Summit in Kananaskis, June 15-17, 2025.
NATO Summit in The Hague, Netherlands, June 24-26, 2025.

Canada-United Kingdom relations

Background

Canada and the UK are key transatlantic partners and allies with a shared head of state and a strong, mutually beneficial bilateral relationship founded on deep historical links, extensive people-to-people ties, close academic, scientific and cultural cooperation, common values, and robust trade, investment and economic relations.

Over 10 million Canadians claim British ancestry and more than 22,000 people immigrated to Canada from the UK between 2016 and 2021 alone. According to Universities UK International, in 2021-22, 7,305 students from Canada chose to study in the UK, making it the second-largest study destination for Canadian students outside of the U.S. In 2022, IRCC reported 2,280 student visas from the UK and its territories.

Cooperation is deep and broad, across all sectors, and at both the political and officials’ levels. The relationship is bolstered by collaboration in a wide range of international fora, including as the only two countries with common membership in the UN, G7, NATO, G20, OSCE, WTO, OECD, and the Commonwealth.

Commercial relations

The UK is Canada’s largest individual trade partner in Europe, and fourth largest globally, with annual goods and services trade of $45 billion in 2023. UK companies are a key source of Foreign Direct Investment (FDI) and employ more than 169,000 people in their Canadian operations. Commercial partnerships are supported by close government and institutional cooperation across many sectors. In January 2024, Canada and the UK renewed a Memorandum of Understanding setting out multi-year cooperation in science, technology and innovation, complemented by a $32 million bilateral partnership in biomanufacturing.

In October 2024, Jonathan Reynolds, UK Secretary of State for Business and Trade, launched Invest 2035: the UK's Modern Industrial Strategy. In this Strategy, there are several areas of potential alignment with Canadian capabilities. This includes opportunities to leverage the already extensive collaboration between Canadian and British research institutions to pursue research and development in areas such as quantum computing and artificial intelligence.

In March 2022, Canada and the UK launched negotiations on a new comprehensive bilateral Free Trade Agreement (FTA), building on the existing Canada-UK Trade Continuity Agreement (TCA). [ * ]

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Upcoming events, decision points and urgent issues

G7 Leaders’ Summit in Kananaskis, June 15-17, 2025.
NATO Summit in The Hague, Netherlands, June 24-26, 2025.

Eastern Europe

Russia

Background

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Ukraine

In 2014, Russia illegally annexed Crimea and other parts of Ukrainian territory, leading to Western sanctions, expulsion from the G7, and other measures. In February 2022, Moscow launched its full-scale invasion of Ukraine, which has led the West to increase sanctions and to impose further costs on Russia, including through diplomatic isolation.

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Sanctions, export controls and trade

Since 2014, Canada has imposed sanctions on more than 3,000 individuals and entities in Russia, Belarus, Ukraine, and Moldova complicit in the violation of Ukraine and Moldova’s sovereignty and territorial integrity, as well as gross and systematic human rights violations. Canada’s latest announcement took place on February 24, 2025, to mark the third anniversary of Russia’s full-scale invasion. These sanctions target 76 individuals and 109 entities, as well as Russia’s shadow fleet. Canada has imposed restrictions on exports to Russia, stopped issuance of export permits and cancelled existing export permits for controlled goods. Revocation of Russia’s Most Favoured Nation status resulted in a 35% tariff on virtually all imports.

Alongside its G7 partners, Canada is leveraging future flows of extraordinary revenues stemming from the immobilization of Russian sovereign assets to deliver Extraordinary Revenue Acceleration loans to Ukraine totalling USD 50 billion (of which Canada’s share is CAD 5 billion).

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International positions [ * ]

G7

The G7 has strongly condemned Russia’s illegal war against Ukraine. G7 members continue to provide military, humanitarian and financial support to Ukraine.

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Indo-Pacific

Indo-Pacific strategy

Background

The Indo-Pacific region is the fastest growing economic region in the world, home to more than half of the global population. As the region with the highest-growth rates in the world, the Indo-Pacific is critical to Canadian trade and security interests. [ * ]

The current Indo-Pacific Strategy (IPS), launched in November 2022 and now in year three of implementation, is supported by an initial $2.3 billion investment and 24 initiatives across 17 government departments and agencies for Phase I (2023-2028). The IPS aims to deepen our regional partnerships, strengthen Canada’s role as a credible and engaged stakeholder, improve and diversify our regional trading position, and reinforce a free, open, inclusive, and rules-based Indo-Pacific.

The IPS provides a 10-year framework to achieve five interconnected objectives:

Promoting peace, resilience, and security;
Expanding trade, investment, and supply chain resilience;
Investing in and connecting people;
Building a sustainable and green future; and,
Canada as an active, engaged, and reliable partner in the Indo-Pacific.

The Government of Canada will review Phase I by late 2027 and make recommendations to consider for Phase II.

Canadian position

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Significant progress has been made implementing the IPS and advancing Canada’s diplomatic, security and trade objectives in the region. [ * ]

Indicators of heightened engagement over the first two years of the IPS include:

Significantly expanded strategic and ministerial dialogues between Canada and key partners in the region; a reinforced naval presence with three Navy ships deployed in the region and increased participation in regional exercises;
The opening of a new Indo-Pacific Agriculture and Agri-Food Office in Manila;
Successful Team Canada Trade Missions (TCTM) to Japan, Malaysia, Vietnam, the South Korea, Indonesia, the Philippines and Australia;
A new Canada-ASEAN Strategic Partnership Agreement (2023);
New comprehensive cooperation agreements with Japan and South Korea, the signing of two memoranda of cooperation with Japan on Battery Supply Chains and Industrial Science and Technology, and a Memorandum of Understanding with South Korea on Critical Mineral Supply Chains;
A Foreign Investment Protection Arrangement (FIPA) with Taiwan; and,
Launching the nuclear development arm of the Canadian Trade Gateway.

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International position

Canada’s allies and regional partners all actively seek to reinforce their strategic and economic interests in the Indo-Pacific. Many have adopted new regional frameworks and strategies: Japan (2016), the United States (2022), India (2018), France (2018, updated 2022), Germany (2020), the UK (2021) the EU (2021), and South Korea (2022). Despite some differences, these approaches are broadly convergent.

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Upcoming events, decision points and urgent issues

Expo 2025 Osaka

Expo 2025 (April to October 2025) in Osaka will present a unique platform for highlighting Canada’s engagement with Japan and the broader region. [ * ]

APEC Summit

APEC (November 2025) will bring together the leaders from 21 member economies in South Korea to discuss economic growth, cooperation, trade, and investment in the region. [ * ]

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China

Background

The People’s Republic of China (PRC or “China”), the world’s second-largest economy after the United States, is a one-party socialist republic. China's Chairman and General Secretary of the constrained by term limits as party leader and secured an unprecedented five-year third term in 2023. Communist Party of China (CPC), Xi Jinping, in power since 2012, is no longer constrained by term limits as party leader and secured an unprecedented five-year third term in 2023.

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India

Background

The Republic of India is a federal parliamentary democracy with the world’s largest population and fifth-largest economy. Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) has been in power since 2014, during which time India has experiencedimprovements in access to modern sanitation, education for girls, and financial services.

India has practised a non-aligned foreign policy since the Cold War. Its geopolitical priorities include managing difficult relationships with Pakistan and China, asserting influence in South Asia, competing with China as the self-proclaimed champion of Emerging Markets and Developing Countries, and deepening engagement in the Indo-Pacific through ASEAN and the Quadrilateral Security Dialogue with the U.S., Australia and Japan.

Canada and India share over 75 years of diplomatic relations and deep people-to-people ties. Bilateral relations were formally designated as a “Strategic Partnership” in 2018, structured around various Ministerial Dialogues, [ * ] The last bilateral PM visit to India was in 2018.

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Canadian ministers and senior officials regularly interact with Indian counterparts. Recent PM-level interactions have been bump-ins at the ASEAN (October 2024), G20 (November 2024) and AI Action (February 2025) summits.

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Middle East

Israeli-Palestinian conflict

Background

The security and political situation remain volatile and fluid with respect to Israel, the West Bank, and the Gaza following the October 7, 2023, terrorist attack on Israel, conducted by Hamas, which Canada unequivocally condemns.

Ceasefire

After over 15 months of fighting in Gaza, with up to 50,000 dead and 110,000 injured, Israel and Hamas agreed to a three-phase ceasefire deal on January 19, 2025, mediated by the U.S., Egypt, and Qatar. The first phase, lasting 42 days, expired on March 1, 2025, with Israel and Hamas divided on next steps. During that period, 33 Israeli hostages were released in exchange for about 1,900 Palestinian prisoners and detainees. As of March 2, 2025, Israel has blocked aid entry into Gaza, in response to Hamas’ refusal to accept a temporary ceasefire extension, which Israel says is supported by the U.S. Negotiations on phase two – permanent ceasefire, release of remaining living hostages, and withdrawal of Israeli forces from Gaza – only began on February 28, 2025, and have yet to yield progress. The third phase would see Hamas return the bodies of hostages who have been killed and for reconstruction to begin in Gaza.

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Humanitarian crisis

Throughout the conflict, the humanitarian situation in Gaza has been dire, with severely constrained access to aid. Attacks on hospitals have left many non-operational or only partially functional, catastrophically affecting access to health and medical care. However, the ceasefire had significantly increased humanitarian assistance, with more aid trucks entering Gaza than initially agreed. Since the beginning of the conflict, Canada has committed $215 million in international aid to Gaza.

Early recovery and reconstruction

Canada is leveraging its G7 Presidency to sustain scaled up humanitarian assistance and coordinate early recovery and reconstruction efforts. It is also supporting the Palestinian Authority’s (PA) reform program and aligning its early recovery and reconstruction programming with PA’s plans and priorities. The UN estimates that clearing rubble will take up to 15 years and estimates that at least $50 billion will be required for the reconstruction of Gaza.

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Syria

Background

After 53 years of Assad family rule in Syria, allied opposition forces led by former militia Hayat Tahrir al-Sham (HTS) launched a surprise offensive against the regime and after less than two weeks, successfully seized Damascus on December 8, 2024. This marked the end of the 13-year Syrian civil war, which killed hundreds of thousands of people and displaced millions.

HTS and the Transitional Government

Formerly known as Jabhat al-Nusra and affiliated with Al-Qaeda, HTS officially severed its ties with the terrorist organization in 2016 but remains designated as a terrorist organization by the UN and several countries, [ * ] Its leader, Ahmed al-Sharaa, formerly known as Abu Mohammed al-Jolani, named himself as Syria’s interim President on January 29, 2025, and announced the suspension of the 2012 constitution. In his first public address as President on January 30, 2025, Al-Sharaa committed to forming an inclusive transitional government representing diverse communities until it can hold free and fair elections. A new Syrian government is set to take over on March 1, 2025.

Canada-Syria relations

Canada and Syria maintained bilateral relations until March 2012, when Canada suspended operations at its Embassy in Damascus due to the deteriorating security situation. Reporting and engagement for Syria are covered by a Syria Hub operating out of the Canadian embassy in Beirut. Syria maintains an honorary consul in Vancouver. Canada maintains a network of sanctions on key Syrian entities under four separate regimes, each with unique effects and rescission mechanisms: (1) UN Sanctions (1267); (2) Criminal Code: HTS listed as a terrorist entity; (3) State Immunity Act: Syria listed as a foreign state supporter of terrorism and; (4) Special Economic Measures (Syria) Regulations.

Canadian programming

Since 2016, through its whole-of-government Middle East Strategy (MES), the government has committed over $4.7 billion in response to the Syrian and Iraqi crises, and their impact in the region. For Syria, this includes the disbursement of over $840 million in international assistance between 2016 and 2024, including $84 million in security and stabilization assistance, $730 million in humanitarian assistance, and $26 million for development assistance in support of vulnerable populations. The MES is sunsetting on March 31, 2025.

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Humanitarian crisis

The dire humanitarian needs in Syria continue to grow, with more than 16.7 million people (of roughly 22.2 million) in need of assistance in 2024, up from 15 million in 2023. There are 5.5 million Syrians who are internally displaced, and another 6.8 million who are registered as refugees in neighbouring countries. Protracted displacement, soaring food and fuel prices, stagnant salaries, loss of livelihoods, and reduced food production have led to widespread food insecurity.

Regional implications

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Arctic

Arctic foreign policy

Background

Canada is the second-largest Arctic state after Russia. Canada has cooperatively managed the Arctic to foster a low-tension region free from military competition. However, strategic competition, climate change, technological advancement and economic interests have placed a strategic focus on this region at the same time that international guardrails have weakened, and broader geopolitics have grown less certain.

In response, Canada's Arctic Foreign Policy (AFP) was launched in December 2024. The AFP is a comprehensive diplomatic policy for Canada’s engagement in and on the Arctic. It positions Global Affairs Canada to address current needs and gives it the flexibility to adapt to future challenges including Russia’s disruptive activities, evolving security threats, new dynamics in Arctic governance, accelerating climate change and increasing challenges to Arctic state primacy.

The AFP is comprised of four foreign policy pillars: asserting Canada’s sovereignty; advancing Canada’s interests through pragmatic diplomacy; leadership on Arctic governance and multilateral challenges; and, adopting a more inclusive approach to Arctic diplomacy.

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Work is underway to implement the AFP, which will include the appointment of an Arctic ambassador; opening new consulates in Anchorage, Alaska and Nuuk, Greenland; initiating an informal Arctic security dialogue with foreign ministers of like-minded Arctic states; [ * ]

The AFP also underscores ongoing efforts that contribute to Canada’s leadership in the Arctic, most notably the commitments in Canada’s 2024 defence policy update, Our North Strong and Free, which places significant emphasis on the Arctic and our Northern approaches as a critical part of globally integrated deterrence. Ongoing investments in the Arctic will help Canada meet its defence spending commitments.

The AFP reflects months of meaningful and distinctions-based engagement with territorial and provincial governments and Indigenous Peoples, including First Nations, Métis and Inuit.

The AFP supplements the international chapter of the Arctic and Northern Policy Framework (ANPF) by recalibrating Canada’s foreign policy approach to the Arctic in response to emerging geopolitical dynamics.

The ANPF articulates the Government of Canada’s goals and objectives for the circumpolar Arctic in three key areas: strengthen the rules-based international order in the Arctic, more clearly define Canada’s Arctic boundaries, and broaden the Government of Canada’s international engagement to contribute to the priorities of Canada’s Arctic. These remain key abiding objectives under the AFP.

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Global and multilateral engagement

G7

Background

The G7 was established in 1975 by the United States, United Kingdom, France, Germany, Italy, and Japan, and later joined by Canada in 1976 and the European Union in 1981. Russia joined the G7 in 1997 but was suspended in 2014 after the annexation of Crimea.

Recent G7 achievements include:

Partnership for Global Infrastructure and Investment (PGII) to mobilize USD $600 billion by 2027 (2022);
Just Energy Transition Partnerships (JETPs) to help coal-dependent emerging economies with just energy transition (2021);
Coordinated response to the war in Ukraine (since 2022);
Global Alliance for Food Security raised USD $14 billion in response to the unfolding global hunger crisis (2022); and,
COVID-19 vaccine delivery and investment in vaccine manufacturing capacity across the developing world, and pandemic prevention, preparedness and response through Pandemic Fund (2020-2021).

The Prime Minister’s Personal Representative (Sherpa) for the G7 and G20 Summits is Deputy Minister Cindy Termorshuizen.

Canadian position

Canada’s 2025 G7 presidency is a responsibility and an important opportunity to promote national interests and shape the global agenda. The Leaders’ Summit will take place from June 15-17 in Kananaskis, Alberta, and will mark the 50th anniversary of the G7.

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This will be underpinned by Canadian interests and values of democracy, human rights and gender equality, as well as efforts to build bridges with emerging markets and developing countries (EMDCs).

Canada is adopting a focused and impactful approach with a streamlined number of priorities, ministerial meetings, and outreach guests at the Summit.

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Six ministerial tracks will support Canada’s agenda: Foreign; Finance; Digital and Industry; Energy and Environment; Interior; and Development. These tracks will in turn be supported by various thematic working groups.

To promote and advance Canada’s agenda, the Prime Minister, ministers, the Sherpa, and other senior officials will be leveraging bilateral, regional, and international meetings throughout the year to consult with international partners.

Outreach beyond the G7 is crucial in the context of shifting geopolitical dynamics and transnational challenges; consultations with EMDCs will be important.

Canadian officials are also engaging with provinces, territories, and Indigenous partners, as well as stakeholders, including civil society, academia, industry, and the G7’s formal network of engagement groups (e.g., Business7, Civil Society7, Women7) to shape and build support for Canada’s agenda.

Canada is advancing gender equality where possible, continuing the commitment from our 2018 presidency. The goal is to mainstream gender equality across our 2025 agenda. Canada will convene the G7’s Gender Equality Advisory Council (GEAC) to provide recommendations on improving gender equality outcomes.

International position

The G7 Leaders’ table has evolved since the 2024 Apulia Summit with recent elections in Germany, Japan, the United Kingdom, the United States, and the European Union.

G7 members support Canada’s streamlined approach to the 2025 presidency and core agenda that focuses on geopolitical and economic issues.

Upcoming events

In addition to the June 15-17, 2025, Leaders' Summit (Kananaskis, Alberta), a Leaders’ videoconference call will be expected in December 2025 to review Canada’s 2025 G7 Presidency and handover to France for 2026.
Foreign Ministers will meet in Canada on March 12-14, 2025 (Charlevoix, Québec), and on the margins of the NATO Foreign Ministers’ meeting (April 3-4, 2025, in Brussels, Belgium).
Finance Ministers will meet on the margins of the World Bank and International Monetary Fund Spring Meetings (April 21-26, 2025, Washington, D.C.), and in Canada on May 20-22, 2025 (Banff, Alberta).
The Digital and Industry; Energy and Environment; Interior; and Development ministerial meetings will be held after the Leaders’ Summit.

International security

Defence policy update (Defence investments)

Background

The Department of National Defence (DND) released a defence policy update in April 2024 titled Our North, Strong and Free: A Renewed Vision for Canada’s Defence (ONSAF). ONSAF provides an update to the 2017 Strong, Secure, Engaged (SSE) defence policy, and builds on commitments made through Canada’s 2022 North American Aerospace Defense Command (NORAD) modernization efforts and the Indo-Pacific Strategy released in 2022. ONSAF aims to strengthen Canadian Armed Forces (CAF) foundations, including by boosting recruitment and retention, providing further support to CAF members, as well as acquiring new capabilities to face and deter against current and emerging threats.

Canada’s defence policy highlights the convergence of multiple threats and trends reshaping our world. While adversarial autocracies are increasingly challenging international order, new and disruptive technologies are rapidly redefining conflict and security. Meanwhile, Arctic warming is making Canada’s Northern region more accessible to foreign actors who have growing capabilities and military ambitions. As a result, ONSAF prioritizes defending the North and asserting Canada’s sovereignty in the Arctic. It also aims to deter and defend against adversaries, [ * ] by leveraging Canada’s alliances and partnerships and strengthening contributions in the Euro-Atlantic and Indo-Pacific regions.

Canadian position

The defence policy commits to increasing the readiness, resilience and relevance of the CAF by strengthening its foundations. This includes boosting and modernizing recruitment, training, and retention efforts across the Defence Team, including civilians and CAF members, and acquiring and modernizing CAF capabilities to face current and emerging threats. New capabilities identified in ONSAF, such as underwater sensors, tactical helicopters, airborne early warning aircraft, and long-range missiles are key to ensuring CAF will be able to operate across land, air, sea, cyber and space domains. ONSAF also identified several (unfunded) exploratory capabilities.

ONSAF increases Canada’s defence spending with an additional investment of $8.1 billion over five years and $73 billion over 20 years (accrual basis). With this investment, Canada’s defence spending is expected to peak at 1.67% of Gross Domestic Product (GDP) by 2029-30 and fall thereafter.¹ Although this significantly contributes to raising Canada’s defence spending as a share of its GDP, it falls short of meeting Canada’s commitment to the North Atlantic Treaty Organization (NATO) defence spending target of 2% of GDP. However, these investments put Canada on track to exceed NATO’s target of 20% of defence spending for major equipment expenditures by 2025.

ONSAF investments build on the historic investments under SSE and NORAD modernization. In 2017, SSE committed approximately $497 billion over a 20-year horizon (accrual basis), including funding for new fleets for the Royal Canadian Navy, the Canadian Army, and the Royal Canadian Air Force. This was followed in 2022 with the allocation of $38.6 billion over 20 years (accrual basis) to modernize NORAD and enhance Canada’s ability to defend North America and Canada’s northern approaches. These investments include the acquisition of Arctic and Polar Over the Horizon Radars to increase domain awareness; new command and control capabilities; short-, medium- and long-range air-to-air missiles; infrastructure; and research and development. ONSAF builds on these previous commitments by acquiring capabilities that will directly reinforce Canada’s ability to deter, detect and defeat threats to the continent.

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International economy and trade

Global economy

Background

[ * ] Debt-to-GDP ratios, which increased sharply during the pandemic, remain elevated, and large budget deficits continue to raise the debt burden in many economies.

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The IMF projects that growth in global trade in 2025 is expected to slow to 3.2% from 3.4% in 2024 in line with world GDP, which is expected to slow to 3.3% in 2025 from its historical average of 3.7% from 2000 to 2019. However, the IMF underlines that U.S. tariff policies have inserted greater uncertainty into this forecast.

Challenges for Canada

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The U.S. has imposed a 25% tariff on worldwide steel and aluminum (coming into force on March 12, 2025), affecting Canada as the largest aluminum supplier to the U.S. (41% of total imports in 2024). It continues to threaten 25% tariffs on all Canadian merchandise exports to the U.S. valued at close to $600 billion in 2024 and has launched a process seeking reciprocal trade with partners which is to be negotiated country by country.

The U.S. is expected to trigger the review of the Canada-United States-Mexico Agreement (CUSMA), mid-2025. U.S. trade and tariff actions may adversely affect investment flows to Canada, especially in the manufacturing sector. [ * ]

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Economic integration has benefitted both countries’ economic growth, security and resilience. Maintaining integration is strong, especially as energy transition, national security concerns and competitiveness in advanced manufacturing, depend on the development of new sources and markets where Canada is positioned to be a strategic partner.

[ * ] Canada was projected by the IMF to have the second fastest (modest 2%) growth rate among G7 economies (after the U.S.). The Bank of Canada had projected GDP growth of around 1.8% in 2025 and 2026.

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Upcoming events, decision points and urgent issues

G7 Trade Ministers meeting taking place in Paris in June 2025.
G20 Trade and Investment Ministers meeting in October 2025.
Ninth Comprehensive and Progressive Trans-Pacific Partnership Commission Meeting in November 2025 in Australia.
Ongoing negotiations with ASEAN on a free trade agreement.
APEC summit hosted in South Korea October 2025.

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Date modified:: 2025-09-04