Top Risks 2025

Canada has always thrived under the stability of a US-led world order. But 2025 brings a stark reality: that world is gone. From economic uncertainty to geopolitical turmoil, Canada faces a future that demands resilience, adaptability, and bold leadership.

Canada in a G-Zero World

The G-Zero, where no single power or coalition maintains global order, is no longer a warning—it’s here. For decades, Canada benefited from a system that aligned with its values: multilateral cooperation, free trade, and predictable alliances. But the G-Zero erodes these pillars, leaving Canada exposed to instability, economic shocks, and diminished influence on the global stage.

This year’s Top Risks 2025 from Eurasia Group outlines the challenges ahead for Canada. It’s not just about navigating these risks; it’s about redefining our approach to trade, defence, and diplomacy in a world that increasingly prioritizes self-interest over collective good.

A Fragile Alliance with the US

The return of Donald Trump to the White House under the banner of “America First” amplifies the uncertainty in Canada-US relations. While the bilateral relationship has weathered volatility before, 2025 poses unique challenges:

1. Economic Vulnerability:

   • Trump’s tariff threats, particularly against Canada, are a tool of leverage. Even as Canada attempts to maintain economic ties, a stronger US dollar and tighter immigration policies will disrupt Canadian industries reliant on cross-border trade and labour.

   • A potential US-Canada trade war would exacerbate inflation and slow growth, further straining an already sluggish Canadian economy.

2. Defence Pressures:

   • Canada will face mounting US demands to increase defence spending, particularly in NATO and Arctic security.

   • Trump’s unilateralism leaves Ottawa without a collaborative partner in addressing regional and global security concerns, forcing Canada into costly decisions to bolster its own defences.

Navigating US-China Tensions

The breakdown in US-China relations places Canada in a precarious position. Caught between Washington’s hardline stance and Beijing’s assertive policies, Canada must walk a tightrope:

• Economic Pressures:

  • Matching US tariffs and export controls on China will strain Canadian businesses with ties to Chinese markets.

  • Failure to align with Washington could trigger retaliatory trade measures from the US.

• Diplomatic Risks:

  • Canada’s attempts to mediate or remain neutral will be complicated by its reliance on US trade and defence partnerships, potentially forcing Ottawa to take sides.

Internal Challenges in a Fragmented World

The G-Zero’s impact on Canada isn’t confined to foreign policy—it reaches into domestic politics and economics:

1. Economic Isolation:

   • The weakening of global trade networks leaves Canada more reliant on its largest trading partners. With Mexico’s position as a US trade target, Canada may face tough choices in renegotiating the USMCA.

2. Polarization at Home:

   • As global tensions rise, domestic debates over foreign policy, immigration, and trade will deepen political divisions. A likely Conservative government will need to balance populist pressures with pragmatic decision-making.

3. Geopolitical Threats:

   • Russia’s Arctic ambitions will require Canada to invest in surveillance and defence capabilities in the High North, even as resources are stretched thin.

A Call to Adaptation and Leadership

The risks Canada faces in 2025 are not insurmountable. They require a proactive approach:

1. Rethink Defence:

   • Canada must prioritize investments in hard power, from modernizing its military to enhancing Arctic infrastructure, to protect its interests in an increasingly lawless world.

2. Strengthen Trade Resilience:

   • Diversify trade relationships beyond the US and China. Expanding partnerships with the EU, Asia-Pacific nations, and Africa can provide new opportunities and reduce dependency.

3. Invest in Multilateralism:

   • Even as global institutions falter, Canada can lead in rebuilding coalitions around climate change, AI governance, and humanitarian aid.

4. Align Domestic Policy with Global Strategy:

   • Address domestic polarization by fostering a unified vision of Canada’s role in a turbulent world. Policymakers must engage Canadians on why bold decisions are necessary for long-term prosperity.

A Nation at a Crossroads

For Canada, 2025 will be a year of reckoning. The comforts of a US-led world are gone, replaced by a volatile landscape where resilience and strategic vision are paramount. To thrive, Canada must embrace its role as a middle power capable of punching above its weight in diplomacy, trade, and security.

How will Canada navigate the G-Zero world? Let’s discuss strategies to ensure resilience and leadership in this new era of global uncertainty.

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Canada faces a stark reality in 2025: the comforts of a US-led order are gone. Trade, defence, and diplomacy demand bold action. Diversify partnerships, strengthen defences, and lead in multilateral efforts. Resilience isn’t optional, it’s survival.

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