Despite ‘elbows up,’ Canada on track to be net lender to U.S. for the ninth straight year

The Canada-U.S. border in Blackpool, Que. Photo by ANDREJ IVANOV/AFP via Getty Images files

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Despite trade tensions and the rise of the “elbows up” movement, Canada remained a net lender to the United States for the ninth straight year in 2025, according to a report Monday from Toronto-Dominion (TD) Bank.

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In the third quarter of 2025 (the latest quarter for which data are available), Canadian households, businesses and governments acquired more than $230 billion in U.S. assets. The total for the year is on track to reach roughly $255 billion, or eight per cent of Canada’s nominal gross domestic product (GDP). This is higher than 2024 figures, but lower than peaks hit in 2021 and 2023, when flows surged to about 15.1 and 12.9 per cent of GDP respectively, wrote TD economist Maria Solovieva in the report.

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Meanwhile, U.S. investment in Canada is expected to total around $150 billion for the year, or just over five per cent of Canada’s GDP — which means Canada has sustained its lopsided financial outflow with its southern trading partner.

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However, different forms of investment indicate varying outlooks on longer-term cross-border prospects.

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Portfolio investment was the key driver for Canadian money flowing into the U.S. in 2025, Solovieva told Financial Post. During the first three quarters of last year, Canadian portfolio investment into U.S. securities reached $200 billion, surpassing the record hit in the same period in 2024.

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“It’s up and down sometimes, but most of the time, especially in the last three years, with the (U.S.) market being so strong, it attracted the investment from Canada,” Soloveiva said.

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More than two-thirds of this investment went toward U.S. debt securities, likely due to higher interest rates south of the border compared with Canada, she said. The remaining third was directed into equity and investment funds as the U.S. tech sector had another strong year, despite a temporary pullback from American markets amid the “Liberation Day” tariffs President Donald Trump imposed globally.

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“Interestingly, staying in Canada would have probably created a better return (for investors),” said Solovieva, noting that Canadian equities delivered 25 per cent returns compared with 13 per cent on U.S. holdings (when accounting for depreciation of the U.S. dollar).

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There were also strong portfolio flows from the U.S. into Canada, as domestic debt markets benefited from a record $150 billion in net inflows from the U.S.

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However, foreign direct investment (FDI) figures presented a different picture. FDI typically signals longer-term interest as businesses from one country make significant investments into businesses in another.

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Historically, Canada and the U.S. have been top foreign direct investors for each other. But in the first three quarters of 2025, Canadian direct investment in the U.S. amounted to just $14.3 billion, roughly $31.5 billion less than over the same period in 2024. This suggests full-year flows could reach only about $19 billion in 2025 — the lowest total since 2009, said Solovieva.

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She attributed any inflows to reinvested earnings rather than new investments. “Companies just left funds in there,” she said. “Because of the trade uncertainty, it became less clear for Canadian companies whether they should be investing in the U.S.”