International transactions in securities during recent Canada-U.S. trade developments

Canada’s net international investment position (IIP) provides a statistical framework for evaluating the degree of financial integration between Canada and other countries. The value of Canada’s net IIP depends on the relative weight of two offsetting factors: (1) the claims that Canadian investors have on financial assets located outside of Canada, via their cumulative holdings of direct investment, portfolio investment, official international reserves, and other financial investments, and (2) Canada’s liabilities to foreign investors via their cumulative investments in financial assets in Canada. Over the last decade, the value of Canada’s international financial assets has grown at a faster pace than its international liabilities, mainly due to fluctuations in equity prices that led to upward revaluations of Canada’ foreign assets, particularly those in the United States, coupled with the depreciation in Canada’s exchange rate. For over a decade, Canada has maintained a net asset position—with the value of the country’s international financial assets exceeding its international liabilities. Canada’s net asset position just prior to the COVID-19 pandemic stood at $691 billion, about one-third of which reflected net claims on foreign financial assets in the United States. Since then, Canada’s asset position has expanded almost threefold to $1.86 trillion, with net claims on U.S. financial assets accounting for all of the cumulative growth in Canada’s net financial position with the world (Chart 1).