Trump Claims U.S. Banks Can’t Operate in Canada—But It’s More Complicated Than That
President Donald Trump has recently voiced concerns that U.S. banks face restrictions when it comes to doing business in Canada. While it’s true that American banks are limited in certain ways, the situation isn’t as straightforward as the president suggests.
Just hours after imposing heavy tariffs on Canada, Trump raised a point that even the American banks he’s defending find somewhat perplexing: the ability—or inability—of U.S. banks to access the Canadian market.
On Tuesday, Trump shared his thoughts via Truth Social, claiming, “Canada doesn’t allow American banks to do business in Canada, but their banks flood the American market.” He added sarcastically, “Oh, that seems fair to me, doesn’t it?”
Although this issue doesn’t often come up in discussions with top U.S. bank executives, it appears to be gaining traction in Trump’s rhetoric. In fact, he had previously raised the subject last month as part of his broader criticism of what he perceives as the unfair economic relationship between the U.S. and Canada. In a post on Truth Social, Trump argued, “Canada doesn’t even allow U.S. banks to open or do business.”
So, what is the reality of U.S. banks’ presence in Canada? Let’s break it down.
Can U.S. Banks Do Business in Canada?
The Canadian banking sector is dominated by the “Big Six,” which includes industry giants like the Royal Bank of Canada and TD Bank. These institutions control most banking activities in the country, from taking deposits to offering mortgages and providing corporate financial services. Furthermore, Canadians tend to prefer in-person banking, meaning any new entrant would need a significant physical presence to compete.
However, U.S. banks are indeed restricted in what they can do in Canada. To operate, foreign banks—including American ones—must either partner with a local entity, set up a Canadian subsidiary, or obtain special government approval. In addition, they must comply with stringent Canadian regulations, including maintaining a substantial amount of liquid assets in reserve, which makes it challenging for them to open retail branches that accept deposits under $100,000.
Given the dominance of Canadian banks, international competitors face a hefty regulatory burden for relatively modest market opportunities. James R. Thompson, an associate finance professor at the University of Waterloo, explains that competing with Canada’s homegrown institutions is difficult without the scale required to make an impact.
As a result, U.S. banks, like JPMorgan Chase, which has only about 600 employees in Canada (compared to over 300,000 globally), focus primarily on non-lending activities like investment services for wealthy Canadians or local businesses.
While Trump’s assertion that U.S. banks can’t operate in Canada isn’t entirely accurate, it’s true that their operations are limited by these regulatory challenges.
Why Is Canada So Restrictive?
Canada’s banking landscape is markedly different from that of the U.S. With over 4,000 banks in the United States and only a few dozen in Canada, the Canadian market is much more concentrated. The “Big Six” control more than three-quarters of all deposits in the country, and for decades, Canada has maintained strict regulations to limit foreign competition.
This approach is one of the reasons Canada weathered the 2008 financial crisis better than its southern neighbor. By keeping foreign players at bay, Canada was able to safeguard its mortgage market and avoid some of the pitfalls that led to the collapse in the U.S.
In response to Trump’s criticisms, Maggie Cheung, a spokesperson for the Canadian Bankers Association, pointed out that U.S. banks are thriving in Canada, with 16 American institutions collectively holding nearly $79 billion in assets. Prime Minister Justin Trudeau also highlighted that American banks are “alive and well” in the country.
However, in relative terms, U.S. banks hold only a small fraction of the total market—just 1 to 2 percent of the $6.5 trillion held by banks in Canada. Laurence Booth, a finance professor at the University of Toronto, explains that U.S. banks struggle to compete because they lack the scale of their Canadian counterparts and face restrictions on foreign ownership, which makes acquisitions challenging.
Are Canadian Banks ‘Flooding’ the U.S.?
In contrast, foreign banks, including Canadian institutions, face fewer restrictions when establishing operations in the U.S. The American market, as a global financial hub, offers more opportunities, including higher-profit lending activities such as 30-year mortgages (compared to Canada’s five-year terms).
The largest Canadian bank in the U.S., TD Bank, operates more than 1,000 branches across the country through a Delaware subsidiary. Despite its impressive reach, Canadian banks hold less than 3.5 percent of total U.S. bank assets, according to the Canadian Bankers Association.
Is This a Major Concern for Wall Street?
While Trump has pushed for deregulation, tax cuts, and even mergers to benefit U.S. banks, expanding into Canada doesn’t appear to be a priority for Wall Street. The Bank Policy Institute, a U.S. banking industry trade group, has yet to release any statements on the issue. Moreover, no major U.S. bank CEO has publicly voiced support for Trump’s push to ease restrictions on Canadian market access.
Instead, the financial industry’s primary concern lies with Trump’s tariffs, which have already pushed bank stocks down by 8 percent over the past month, according to the KBW Nasdaq Bank Index.
Conclusion
While President Trump’s claims about U.S. banks being unable to operate in Canada are not entirely accurate, there are significant barriers to entry for American banks in the Canadian market. These restrictions are largely a result of Canada’s tightly controlled financial system, which has allowed its domestic banks to thrive while limiting foreign competition. Despite these challenges, U.S. banks still have a presence in Canada, though their operations are relatively small compared to Canadian banks’ dominance in the U.S. market.
In short, the issue is complex, and Trump’s oversimplified view doesn’t fully capture the reality of the situation.
