Sharing the largest international border in the world, few countries have had as close economic ties as Canada and the United States.

America is Canada’s largest export market, and Canada is one of the biggest sources of imports for the U.S., so in the past if their economy did well, so did ours.

“Canada’s future, however, may depend less on its U.S. relations,” wrote Paul Edelstein, a senior economist with Moody’s Analytics in a recent report.

Moody’s charted the path of the two economies and discovered a growing gap that it predicts will only get wider.

Canada and the United States grew at pretty much the same pace between 2010 and 2017. U.S. real

gross domestic product rose by 20 per cent during these years and Canada’s grew by 18 per cent.

Recently, however, that pattern has shifted. Since 2022, U.S. cumulative growth of 6.7 per cent has overtaken Canada, where GDP rose just 3.6 per cent.

Edelstein said Donald Trump’s trade war has contributed to the widening gap. Facing steep sectoral tariffs from the United States, Canada’s exports fell 27 per cent annualized in the second quarter, one of the worst quarters on record.

But the divergence predates Trump’s tariffs, he said, and weak labour productivity in Canada has been part of the problem. Since 2022, U.S. labour productivity has grown by 5.6 per cent, while it has fallen by 1.2 per cent in Canada.

Moody’s forecast for the next five years — which is more pessimistic than those of Canada’s big six banks — projects that the gap between the U.S. and Canadian economies will only grow bigger. It predicts Canada’s real GDP growth will increase by just 0.9 per cent this year and 0.1 per cent in 2026, compared with growth of 1.9 per cent and 1.7 per cent in the United States.

Over the next five years it sees Canada’s growth averaging 1.5 per cent, compared with 2.2 per cent growth in the United States.

Moody’s says Canada’s prospects now depend on shifting away from an export-dependent model focused on the United States.

The Federal government appears to be moving in that direction with promises to increase spending on infrastructure and on expanding production capacity. Progress has been made on establishing new free trade agreements with countries in southeast Asia.

“These efforts, however, are likely to take time to produce results for the Canadian economy,” said Edelstein.

 Sign up here to get Posthaste delivered straight to your inbox.

Made in Canada has become important to Canadians during the trade war with the United States, but apparently there are limits.

The Bank of Canada’s survey of consumer expectations out Monday showed that Canadians are spending less on U.S. goods and holidays than they did before Donald Trump took power and spending more on goods made in Canada and staycations within the country.

However, prices are still a deciding factor for many,  with three-quarters of survey respondents saying they are not willing to pay more than an additional 10 per cent for a Canadian product.

As one respondent put it: “I’m going more out of my way now to buy Canadian. I would say I am willing to pay more these days for products made in Canada. Not a substantial amount more. I’d say 5–10 per cent more at the most.”

  • Today’s Data: Canada’s inflation reading for September
  • Earnings: Netflix Inc., General Motors Co., Equifax Inc., Capital One Financial Group, Che Coca-Cola Co., General Electric Co.
  • Garry Marr: Here’s the real reason the Canadian dream of home ownership won’t die any time soon
  • The number of Canadian companies expecting a recession is rising, Bank of Canada survey shows
  • Canada to launch national anti-fraud strategy and new agency to fight financial crime

Read more on the business outlook.  Married nearly 30 years, Laurence, 58, and Sandra, 61, are officially empty nesters. Their two adult children are independent and building their careers and the couple are ready to fully embrace their next chapter — if they have saved enough. Another big question is when they should start taking Canada Pension Plan? Family Finance has some suggestions.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

McLister on mortgages

Read on Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

Financial Post on YouTube

mortgage rate page for Canada’s lowest national mortgage rates, updated daily. Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at 

  • The biggest oil glut the world has ever seen is about to come ashore
  • Don’t let Trump supporters fool you. The U.S. economy might not be all right

posthaste@postmedia.com . Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here