US banks can operate in Canada, but market barriers, not regulations, limit expansion
Despite President Donald Trump repeatedly claiming that Canada blocks American banks from doing business, most US banks do not appear to view the issue as a major concern.
In a March 4 post on Truth Social, Trump claimed that “Canada doesn’t allow American banks to do business in Canada, but their banks flood the American market.”
He had made a similar statement in February, saying, “Canada doesn’t even allow US banks to open or do business there.”
However, US banks can operate in Canada, though they must comply with certain regulations that make expansion difficult. Despite these barriers, a report from The New York Times found that bank executives rarely raise the issue, nor do they appear to be lobbying for changes.
Although American banks are not outright banned from Canada, entering the market requires jumping through several regulatory and operational hurdles. According to report, foreign banks looking to expand into Canada must obtain government approval, establish a Canadian subsidiary, and work with a Canadian financial institution.
Additionally, foreign ownership laws prevent US banks from acquiring Canadian banks outright, limiting their ability to expand through mergers.
The Big Six Canadian banks hold over three-quarters of all deposits, making it difficult for new entrants to compete. Another major hurdle is Canadian consumer behavior. Many customers still prefer in-person banking, meaning foreign banks would need to open physical branches to attract business, which adds significant costs.
Read more: Rocket Mortgage to cease Canadian operations
Trump’s banking complaints come amid escalating trade tensions between the US and Canada. On March 5, the US imposed sweeping tariffs, including 25% levies on Canadian and Mexican imports and 20% duties on Chinese goods.
In response, Canada retaliated with tariffs on $107 billion worth of American products. Canadian officials have stated that these tariffs will remain in place until the US lifts its own trade restrictions.
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