Navigating the Canada-U.S. Trade Shock: Strategic Entry Points in Resilient Domestic Sectors

The Canada-U.S. trade relationship has long been a double-edged sword. While the U.S. remains Canada’s largest trading partner, escalating tariffs on steel, aluminum, and autos in 2025 have triggered a 27.5% contraction in steel exports and a 1.6% Q2 GDP slowdown [1]. Yet, amid this turbulence, undervalued sectors insulated from U.S. tariffs—such as infrastructure, green technology, and non-ferrous metals—are emerging as strategic entry points for investors. These sectors are not only weathering trade shocks but are also positioned to capitalize on potential Bank of Canada (BoC) easing, which could lower borrowing costs and stimulate domestic demand.

Infrastructure: A Policy-Driven Growth Engine

Canada’s $200 billion infrastructure plan, spearheaded by provinces like Ontario and Quebec, is a cornerstone of economic resilience. Engineering structures output has already risen 3.6% in 2025, driven by projects in transportation, clean energy, and digital connectivity [4]. The BoC’s projected rate cuts—two to three by year-end—could amplify this momentum by reducing financing costs for public and private projects. For instance, green infrastructure ETFs and government-backed initiatives, such as the $10 billion clean power fund, are attracting capital to decarbonization efforts [2]. With U.S. tariffs unlikely to disrupt domestic infrastructure spending, this sector offers a stable, long-term investment horizon.

Green Technology: Decarbonization as a Tailwind

The green technology sector is another bright spot. Clean technology employment is on track to reach 192,632 jobs by year-end 2025, while ISED-supported innovations have driven a 30.7 megatonne reduction in GHG emissions [3]. The BoC’s dovish stance could further accelerate adoption of renewable energy and energy transition projects, which require significant upfront capital. For example, Ontario’s green steel initiatives and Quebec’s nuclear energy expansions are leveraging low-interest loans and tax credits to offset trade-related inflation [4]. Unlike export-heavy sectors, green tech benefits from domestic policy tailwinds and global decarbonization trends, making it a hedge against U.S. trade volatility.

Non-Ferrous Metals: Insulated and Undervalued

Non-ferrous metals—such as copper, zinc, and nickel—are uniquely insulated from U.S. tariffs, which target ferrous materials like steel and aluminum [5]. This exclusion has allowed the sector to thrive even as U.S. tariffs erode other industries. The non-ferrous metal balls market, for instance, is projected to grow at a 5% CAGR from 2026 to 2033, driven by demand in aerospace and electronics [2]. A potential BoC rate cut would further boost demand by lowering borrowing costs for manufacturers reliant on these materials. Additionally, Canada’s strategic focus on critical minerals for green tech—such as nickel in battery production—positions the sector as a linchpin of North American supply chain resilience [1].

Conclusion: Balancing Risk and Reward

While U.S. tariffs have created headwinds for traditional export sectors, they have also highlighted the importance of diversification and domestic innovation. Investors seeking to navigate this trade shock should prioritize sectors with strong policy support, low U.S. dependency, and growth potential from BoC easing. Infrastructure and green technology offer immediate resilience, while non-ferrous metals present a compelling case for undervalued, tariff-insulated growth. As the BoC monitors inflation and trade tensions, these sectors are poised to outperform in a landscape where adaptability is key.

Source:
[1] Industries with Biggest Decline in Exports in Canada in 2025 [https://www.ibisworld.com/canada/industry-trends/industries-biggest-decline-exports/]
[2] 2025 Canadian Infrastructure Trends [https://bennettjones.com/Blogs-Section/2025-Canadian-Infrastructure-Trends]
[3] Innovation, Science and Economic Development Canada's 2024–2025 Departmental Plan [https://ised-isde.canada.ca/site/planning-performance-reporting/en/departmental-plans/innovation-science-and-economic-development-canadas-2024-2025-departmental-plan]
[4] The Impact of U.S. Tariffs on Canada's Economy and ... [https://www.ainvest.com/news/impact-tariffs-canada-economy-implications-bank-canada-rate-path-2508/]
[5] Scrap not included in US steel, aluminum tariffs [https://www.recyclingtoday.com/news/steel-aluminum-ferrous-scrap-recycling-tariffs-usa-excluded-rema-aec-aisi/]