Foreign direct investment into Canada totalled $25.1 billion in Q4, bringing full-year 2025 to $96.8 billion, above $86.6 billion in 2024. This marks the highest annual inflows since 2007, according to a recent report by TD Economist Maria Solovieva.
Merger-and-acquisition activity was the primary driver of the increase. Sector gains were concentrated in trade and transportation and management companies, followed by manufacturing, she said.

Maria Solovieva
“U.S. direct investment into Canada totalled $12.1 billion in Q4 and $52.5 billion for the year, roughly in line with 2024. Foreign direct investment from countries other than the United States amounted to $3.7 billion in Q4 2025 and $40.9 billion in 2025, up modestly from $39.4 billion in 2024, with the United Kingdom the largest non-U.S. source,” added the economist.
Canadian Direct Investment Abroad
Solovieva said Canadian direct investment abroad slowed to $13.5 billion in Q4, bringing full-year 2025 to $79.4 billion –well below 2024’s $123 billion outflow and the lowest level since 2020.
“The softness was driven mainly by a pullback in mergers and acquisitions, which registered $3 billion of total divestment. Stronger reinvested earnings offered an offset, amounting to $80 billion for the year, up $11 billion from 2024,” she explained.
“Sectorally, trade and transportation and management companies led outward direct investment. Energy and mining, as well as finance and insurance, acted as a drag.
“Geographically, the split is telling. Canadian direct investment in the United States was $12 billion in Q4, bringing the 2025 total to $27.6 billion, less than half of 2024’s $65.5 billion.
“Canadian direct investment to non-U.S. destinations slowed sharply in the fourth quarter, totalling just $1.9 billion and totalling $48.6 billion, down from $62.2 billion in 2024.”

Solovieva outlines the key implications to those numbers:
- Canadian investors hit the pause button on new direct flows in 2025. Outward FDI to the U.S. was the main pressure point with the year-to-date flows were well below last year’s pace, as trade-policy uncertainty weighs on long-term capital investment decisions. Canada remained an attractive destination for foreign investment, as direct investment inflows reached new highs and was driven primarily by M&A activity. U.S. inflows ultimately exceeded last year’s total, supported by a strong fourth quarter, although they lagged throughout the year amid prevailing trade uncertainty.
- One notable trend is stronger inflows from the United Kingdom in 2025, which accounted for 12% of total inward FDI and acted as a swing factor for overall inflows this year. As often is the case, these flows are largely equity-driven and likely reflects deepening bilateral partnership, following a string of cooperation agreements beginning in early 2024. According to Investment Canada Act filing data, there were roughly 50 investment notifications from UK-registered entities over the course of the year through November 2025. The telling pattern is in the composition: over 40% of UK filings were acquisitions of Canadian software companies, from cybersecurity to AI-powered asset management, suggesting UK investors see Canadian tech as both promising and a natural gateway to North American markets. In dollar terms, however, the largest deal was almost certainly Rio Tinto’s acquisition of Livent Lithium Quebec – part of its US$6.7 billion global takeover of Arcadium Lithium – completed by mid-2025.
- With Canada pursuing more incremental engagements with other partners, including the most recent PM’s announcement of visits to India, Australia, and Japan, we may see a more diversified flow of direct investment towards the second half of the year. A trend worth watching.

Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024, 2025 and 2026.
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