Canada and the United Arab Emirates (UAE) have signed a Comprehensive Economic Partnership Agreement (CEPA) aimed at reducing trade barriers, expanding market access and encouraging investment, as Prime Minister Mark Carney seeks to diversify Canada’s economic partnerships amid continuing trade tensions with the United States.
Carney and Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan presided over the signing on Tuesday.
As part of the deal, both Ottawa and Abu Dhabi will cut tariffs, reduce administrative barriers and create more opportunities for businesses in both countries.
The deal is an important milestone in Canada’s efforts to expand trade beyond its largest economic partner.
US President Donald Trump’s tariffs have increased pressure on Canadian industries, while the ongoing negotiations between Washington and Ottawa have so far struggled to produce a broader agreement.
Carney has pledged to double Canada’s non-US trade over the next decade, prompting Ottawa to pursue trade agreements across the Asia-Pacific region, Europe and the Middle East.
According to Canada’s Prime Minister’s Office, the agreement will reduce or eliminate tariffs on more than 99% of current Canadian exports to the UAE once fully implemented.
The government expects the CEPA to enter into force in 2027, subject to the required approval process.
“The agreement will also address non-tariff barriers, create a more predictable environment for trade and investment, and expand market access for Canadian goods and services,” the Prime Minister’s Office said.
ALSO READ | US midterms: ‘Republicans may paint Democrats as a greater risk’
The agreement covers opportunities across industrial machinery, agriculture, forestry, fisheries, environmental services, engineering and other sectors.
The agreement is expected to benefit Canadian exporters seeking new customers in a market that has become an important commercial partner for the country.
Canadian farmers growing pulses and canola could gain from improved market access, alongside manufacturers of industrial machinery and power-generation equipment. Canada’s aerospace industry and other technology-focused businesses are also expected to benefit from lower trade barriers.
The UAE, meanwhile, is seeking to expand commercial links with Canadian companies and attract opportunities in high-growth industries.
“We see considerable potential for our private sector, whether through improved market access for our exporters or access to investment opportunities in high-growth sectors such as logistics, communications, advanced technology and manufacturing,” UAE Foreign Trade Minister Thani Al Zeyoudi said.
Al Zeyoudi signed the agreement with Canadian International Trade Minister Maninder Sidhu.
The UAE is Canada’s largest export market in the Middle East and an important buyer of Canadian motor vehicles, automotive parts and machinery. Bilateral trade reached CUSD 3.5 billion (USD 2.48 billion) in 2025, with trade between the countries growing by around 10% annually in recent years, according to government data.
Investment is another major part of the relationship.
The UAE committed up to USD 50 billion in investment in Canada in 2025, signalling the potential for closer economic cooperation beyond merchandise trade.
The CEPA is expected to make commercial conditions more predictable by addressing non-tariff barriers and improving access for goods and services.
Such provisions could help businesses navigate regulatory requirements and identify new opportunities in both markets.
ALSO READ | Trump eases Canadian tariffs, repairs ties with Bombardier ahead of US midterms
The signing represents the final step before Canada’s Parliament can ratify the agreement.
Although the agreement is not expected to enter into force until 2027, its completion advances Carney’s efforts to reduce Canada’s reliance on the US market and build stronger international trade relationships.
However, the US remains a critical destination for Canadian exports, particularly in industries with integrated supply chains, including automotive manufacturing and steel.
Tariffs on products crossing the border can increase costs for manufacturers, suppliers and consumers on both sides.
Against that backdrop, Carney’s commitment to double non-US trade over the next decade reflects an effort to broaden Canada’s export base and reduce its exposure to changes in US trade policy.
The UAE agreement provides one route toward that objective, although its longer-term economic impact will depend on how quickly businesses use the new market access and investment opportunities.
Ottawa is also seeking to repair relations with Washington and secure relief from tariffs affecting key Canadian industries.
Both sides, as per Reuters, have been currently discussing a possible agreement to ease US tariffs on Canadian steel and automobiles.
The talks focus on duties imposed under Section 232 of US trade law, including tariffs of up to 50% on Canadian steel and 25% on automobiles.
Negotiators are discussing potential relief from the measures as both governments attempt to restore trade relations following the collapse of broader negotiations in August.
The discussions come shortly before the November 3 US midterm elections, when Trump’s trade policies have become a political concern for some Republican candidates in border states.
Trump’s tariff warfare policy, coupled with his alleged poor handling of the American economy, has made him extremely unpopular among voters across party lines. However, candidates in states bordering Canada have called for an end to the trade dispute, highlighting the domestic political pressure surrounding tariffs.
A Canadian source familiar with the negotiations indicated that the parties could reach an agreement on steel and automotive duties before the elections.
US sources, however, said the Trump administration wanted Canada to make further concessions.
Section 232 tariffs are administered by the US Commerce Department, placing Commerce Secretary Howard Lutnick at the centre of the negotiations rather than leaving the discussions solely to the office of the US Trade Representative.
“Lutnick and Dominic LeBlanc, Canada’s minister responsible for Canada-US trade, have been in regular contact recently,” one source said.
A spokesperson for LeBlanc said Canada remained engaged with its US counterparts.
“Canada remains in constructive dialogue with our U.S. counterparts on a range of priorities,” the official noted.
“Ottawa was prepared to work towards a more mutually beneficial trading relationship that respected Canada’s interests,” the person added.
“The Office of the US Trade Representative has also been in contact with Canada in recent days about the overall structure of a potential agreement and other trade issues,” a USTR official said.
Carney, too, confirming the news, said discussions with Washington had experienced “a slight intensification” but stressed that Canada’s position had not changed.
“To the extent any progress has been made, it’s because the US is coming closer to our position,” he told reporters, without providing further details.
A Canadian industry source suggested an agreement could be reached quickly but cautioned that it might cover only a limited number of issues.
“If it happens, it’ll happen fast. But my sense is it’ll be a narrowed deal if it even happens,” the source said.
Another Canadian source said they had long expected a possible agreement on Section 232 tariffs before the midterms.
Any deal would ultimately depend on Trump and Carney, the source added, noting that both leaders had indicated that a mutually beneficial outcome was possible.
Carney has said he wants an agreement that delivers meaningful benefits for Canada.
The urgency reflects the economic importance of the automotive sector, where manufacturers rely on cross-border supply chains to move vehicles and components between factories in the two countries.
Trade talks between the two collapsed in August over several issues, including whether duties should be reduced on medium- and heavy-duty vehicles that are important to Canadian factories.
US automakers had hoped negotiations would produce relief from the original 25% tariffs, which have raised the cost of transporting vehicles and parts across the border.
By September, both sides had imposed tariffs and counter-tariffs on each other, but Trump escalated the situation by announcing a 50% increase in tariffs on Canadian steel and automobile imports, effective January 1, 2027.
During a political rally on Sunday, the Republican predicted a swift resolution to the dispute but offered little detail.
Washington has already taken some steps to adjust its tariff policy.
On Friday, Trump signed an order removing 50% tariffs on certain Canadian agricultural and forestry products, a move that could benefit businesses in Maine.