Eurasia Group says no country more at risk than Canada in relations with the U.S.

Canada stands to face the biggest fallout of political turmoil in the United States in 2026, a new report by the Eurasia Group warned on Friday.

Canada stands to face the biggest fallout of political turmoil in the United States in 2026, a new report by the Eurasia Group warned on Friday.

The risk management firm says the long-standing relationship between the two countries “is history” and ongoing trade uncertainty will have an impact on the Canadian economy.

“(U.S. President Donald) Trump’s systematic effort to dismantle checks on his power and weaponize the machinery of government against his political enemies will inevitably reshape not only Canada-U.S. relations, but the Canadian economy and Canadians’ engagement with the rest of the world,” the report says.

“The challenge for Ottawa — and Canadian firms more broadly — will be to play defence and offence at the same time: managing an unpredictable and unreliable U.S. while carving out new roles in an increasingly unstable G-Zero world.”

The report warns Canada’s efforts to diversify trade and international relationships will face “powerful headwinds” this year, and that it will need to manage its relations with the U.S. while building new ones with other countries.

The relationship between Canada and the U.S. soured in 2024 following President Donald Trump’s return to the White House and his threats to somehow make Canada a U.S. state.

Trump has imposed multiple tariffs on Canada in the months since, including devastating duties on the steel, aluminum, automotive and lumber sectors.

Citing the recent U.S. military operation in Venezuela to capture President Nicolas Maduro, the report says Trump’s desire to dominate the Western Hemisphere will “keep Canada on the defensive.” It says Carney’s government will have to defend Canadian sovereignty while acknowledging the degree to which Canada depends on the U.S.