Oxford Economics highlighted the long-term diversification benefits of a potential European Union-Canada alliance, while warning of near-term risks from potential US tariff fallout and the "untested" legal framework of an associate partnership.
In a research briefing published Sept. 18, Oxford Economics noted that expanding trade between the EU and Canada supports a long-term diversification strategy rather than a quick economic fix, given that Canada's trade volume with Europe is just one-seventh of its trade with the US.
"Risk to the US relationship remains the one to watch, and President Donald Trump's opposition to a Canada-EU deal poses a bigger near-term threat to the economy than any upside from deeper ties with the EU," Oxford Economics said.
Regardless, analysts believe that closer collaboration offers the EU significant strategic gains in energy security through access to Canadian exports of crude oil, natural gas and hydrogen, while also securing its supply chains through access to critical minerals. The alliance is also seen to boost defense, digital services trade, and student mobility. However, a broader labor agreement is expected to "fall short" of open-border models like the EU-Switzerland framework.