Canada's foreign investment surge: A closer look reveals more than meets the eye
OTTAWA — Canada's foreign direct investment (FDI) surged to nearly two-decade highs last year, according to Statistics Canada. While this is certainly good news, economists caution that the story doesn't end there. The volume of capital flowing into Canada isn't the sole indicator of its economic health.
FDI reached a record $96.8 billion in 2025, up from $86.8 billion in 2024, marking the highest level since 2007. This surge was largely driven by mergers and acquisitions (M&A) activity, which accounted for $43.8 billion of FDI last year, similar to 2024 levels.
Prime Minister Mark Carney celebrated this as a positive development, emphasizing the potential for job creation and economic growth. However, TD Bank economist Maria Solovieva urges a more nuanced perspective.
She highlights the importance of examining FDI on a sectoral basis. For instance, while the trade and transportation sector and company management and manufacturing industries saw significant FDI gains, the source and nature of these investments matter.
A significant portion of last year's FDI came from the United States, with Canada's investments in the U.S. slowing due to tariff disputes. Investment between Canada and the U.S. was generally sluggish throughout the year, with a surge in M&A activity from the U.S. in the fourth quarter bringing FDI levels back to average.
Canadian direct investment abroad also decreased to $79.4 billion in 2025, down from $123 billion the previous year, the lowest since 2020. This could be attributed to diplomatic efforts and the groundwork laid by the previous Liberal government.
Solovieva points out that FDI can have trade-offs. For example, the acquisition of a Quebec lithium mine by Rio Tinto, a global mining giant, may boost Canada's critical minerals sector and exports, but much of the revenue will flow to Rio Tinto's international bases.
Kaylie Tiessen, chief economist at the Canadian SHIELD Institute, emphasizes the importance of quality over quantity. She warns that not all FDI is beneficial; global firms buying up Canadian companies and extracting profits don't contribute to economic resilience. However, FDI that leads to new production facilities and job creation is more desirable.
Tiessen stresses the need for careful consideration of which FDI the government attracts and supports. She highlights the potential negative impact of companies moving their head offices abroad after mergers or acquisitions, leading to job losses and reduced control over the economy.
In essence, while rising FDI is a positive sign, economists urge a critical examination of its sources, nature, and potential long-term consequences to ensure it benefits Canadians and strengthens the economy.
