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Canada-India Trade Relationship Hit by 'Significant Chill'

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  Published in Politics and Government on Monday, March 2nd 2026 at 11:31 GMT by Global News
      Locales: CANADA, INDIA

Toronto, ON - March 2nd, 2026 - The already complex relationship between Canada and India is experiencing a significant chill, with far-reaching consequences for bilateral trade and investment. The killing of Hardeep Singh Nijjar in Surrey, British Columbia, and the subsequent allegations leveled by the Canadian government against agents linked to the Indian government, have plunged negotiations for a long-awaited free trade agreement into indefinite suspension, and are prompting Canadian businesses to rethink their strategies regarding the Indian market. Experts predict a protracted period of uncertainty and potential economic repercussions for both nations.

The foundations of the Canada-India trade relationship, while showing positive growth in recent years, were always built on delicate diplomatic ground. Negotiations for a Comprehensive Economic Partnership Agreement (CEPA), intended to substantially reduce tariffs and barriers to trade, began over a decade ago. While progress had been made, significant obstacles remained, particularly concerning agricultural subsidies, intellectual property rights, and temporary foreign worker programs. Now, with trust between the two governments deeply eroded, the future of the CEPA appears bleak.

"This isn't simply a pause in negotiations; it's a fundamental setback," explains Derek Burleton, Senior Economist at the Conference Board of Canada. "The damage to the relationship is considerable, and rebuilding that trust will take significant time and demonstrable action. While trade will likely continue at a reduced level, the potential for a truly comprehensive and mutually beneficial agreement seems distant."

In 2023, Canada exported approximately $2.7 billion worth of goods to India, with key commodities including canola seed, wood pulp, and aluminum. Conversely, India exported around $3.3 billion to Canada. While these figures represent a growing trade volume, experts warn that these numbers are likely to stagnate or even decline in the near term. The Canadian Federation of Independent Business (CFIB) is already receiving reports of anxiety amongst its members with operations in India.

"Our members are voicing legitimate concerns about the security of their assets and personnel in India," says Laura Jones, CFIB's Vice-President of Operations and Provincial Affairs. "Beyond the immediate safety concerns, they are bracing for potential retaliatory measures from the Indian government, ranging from increased scrutiny of investments to non-tariff barriers. Some are already actively exploring contingency plans, including diversifying their operations outside of India."

The situation is forcing Canadian companies to conduct a thorough risk assessment of their Indian investments. While abandoning the Indian market entirely isn't likely for many established players, the appetite for new investments is demonstrably shrinking. This reluctance will have a cascading effect, impacting job creation and economic growth in both countries.

However, the implications extend beyond just bilateral trade. Patricia Adams, a Senior Fellow at the Frontier Centre for Public Policy, believes this crisis underscores the need for Canada to fundamentally reassess its Asian trade strategy. "For too long, Canada has focused disproportionately on potential gains in India and China, neglecting other important partners in the region," Adams argues. "This situation is a clear warning that relying heavily on any single country, particularly one with complex geopolitical dynamics, is a precarious strategy."

Adams advocates for a renewed focus on strengthening trade relationships with stable and reliable partners like Japan and South Korea. These nations offer established markets, robust legal frameworks, and a shared commitment to democratic values. Diversifying trade partnerships will not only mitigate the risks associated with geopolitical instability but also create new opportunities for Canadian businesses.

The current impasse also highlights the growing importance of "friend-shoring" - the practice of prioritizing trade with countries that share similar values and strategic interests. While economic efficiency remains a crucial factor, security and resilience are increasingly being considered alongside cost. Canada may need to prioritize partnerships that align with these principles, even if it means accepting slightly higher costs in the short term.

The long-term consequences of the Canada-India trade freeze remain to be seen. Repairing the damage will require significant diplomatic effort, transparency, and a commitment to addressing the underlying issues. Until then, a period of economic uncertainty and cautious investment is likely to prevail, forcing Canada to adapt its trade strategy and prioritize diversification in a rapidly changing global landscape.