For decades, the United States has been the natural first market for Canadian exporters. Geography, integrated supply chains and preferential trade arrangements have made that relationship difficult to replicate.
But the current U.S. tariff environment is highlighting the risk of relying too heavily on a single export market—and encouraging Canadian businesses to look elsewhere.
That diversification is already underway. According to Global Affairs Canada, Canadian exports to the U.S. declined 3.7% in 2025, while exports to non-U.S. markets increased 11.1%. Non-U.S. markets accounted for 32.8% of Canadian exports—the highest share in more than four decades.
For Canadian SMEs, developing customers in Europe, the United Kingdom and other international markets could reduce U.S. dependence. But accessing those markets may involve meeting different requirements—including, in some cases, providing carbon information.
The New Trade Question: What Is Your Carbon Footprint?
The European Union provides a good example.
The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on January 1, 2026. It currently covers selected goods in cement, iron and steel, aluminum, fertilizers, electricity and hydrogen and places a carbon price on emissions embedded in certain imports.
The United Kingdom is moving in a similar direction. Its CBAM takes effect January 1, 2027 and initially applies to specified products in aluminum, cement, fertilizer, hydrogen, and iron and steel. Overseas producers may need to provide information about the embodied emissions of goods supplied to UK customers.
This doesn’t mean every Canadian SME exporting to these markets will face mandatory carbon reporting. Sector, product and customer requirements matter.
However, it demonstrates the growing connection between carbon information and international trade.
Your Customer May Be the One Asking
Regulation isn’t the only consideration.
Canadian SMEs may supply multinational companies with their own emissions targets, reporting requirements or supplier sustainability programs. Those customers may increasingly ask:
What are the emissions associated with the products we purchase from you?
An SME may not have a regulatory reporting obligation, but providing credible carbon information could still become part of winning or retaining business.
The question therefore changes from:
“Are we required to report our emissions?”
to:
“Will the customers we want to do business with expect this information?”
Carbon Readiness Could Become Export Readiness
SMEs don’t necessarily need elaborate ESG reports.
A practical starting point is understanding Scope 1 and Scope 2 emissions, identifying significant Scope 3 sources and establishing a defensible carbon baseline. Exporters of carbon-intensive products may need to go further and understand emissions associated with individual products or production processes.
There can also be a financial benefit. Energy, fuel, transportation and material consumption represent both emissions and costs. Understanding them can uncover opportunities for improved efficiency and lower operating expenses.
A Crossroads for Canadian SMEs
U.S. tariffs have made trade diversification a more immediate strategic issue for Canadian businesses.
New markets present opportunities—but also different requirements. In some jurisdictions and supply chains, carbon performance is becoming one of them.
Carbon measurement should not be viewed simply as another environmental reporting obligation. For some Canadian SMEs, it may increasingly become part of the price of admission to new customers and new markets.
The Carbon Trail helps SMEs understand their carbon footprint, identify the information customers may require, and develop practical carbon-reduction roadmaps that support both sustainability and business strategy.