A new geopolitical risk assessment from Eurasia Group highlights that Canada could be the country most profoundly affected by ongoing political instability in the United States in 2026, underscoring how closely tied Ottawa’s economic and diplomatic fortunes are to its southern neighbour. The firm’s analysis suggests that shifts in U.S. policy and political dynamics will force Canada to rethink longstanding assumptions about its relationship with the United States and its position in the global order.
According to the report, the traditional Canada–U.S. partnership — once stable and predictable — has fundamentally changed following political developments in Washington, including controversial executive actions and tariff increases on Canadian steel, aluminum, automotive and lumber products. Increased trade friction and unpredictability in U.S. policymaking are expected to reverberate through the Canadian economy, affecting exporters, investors and broader market confidence.
Eurasia Group warned that Canada’s efforts to diversify its trade relationships beyond the U.S. will face “powerful headwinds” in 2026. While diversifying away from a single market has long been viewed as a prudent strategy, the report argues that economic and political ties to the United States remain so dominant that any attempt to build new partnerships will be complicated by external uncertainty and domestic economic pressures.
The report also highlights the diplomatic challenge of balancing defence and offence simultaneously: Ottawa must manage an unpredictable and sometimes adversarial U.S. relationship while building productive engagement with other global partners in Europe, Asia and beyond. This dual task is seen as especially difficult given the historical comfort Canada enjoyed under U.S. security and trade umbrellas — a comfort that may no longer be assured.
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Central to the analysis is the idea that U.S. political turbulence and policy swings have broader implications for global economic arrangements, including trade agreements, regulatory cooperation and defence pacts. This means Canadian businesses and supply chains that are deeply integrated with U.S. markets could face unanticipated costs, regulatory divergence and competitive challenges.
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The report underscores that the era of taken-for-granted bilateral cooperation may be ending. Canada may have to adapt to a world where no single external partner can assure stability and where geopolitical volatility, especially emanating from the United States, affects economic planning, foreign policy and national security. The firm’s findings signal that policymakers in Ottawa will need to redesign strategies for economic resilience and international engagement as global conditions evolve.
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