Jan 27 2008
The “C” Word…And It’s Not What You Think
When it comes to bizarre and inscrutable linguistic events, this one really takes the cake.
Apparently – and I’m still not sure I believe it – some people who would otherwise use the “N” word have opted for a substitute. Ready? It’s “Canadian,” as in “There are a lot of Canadians in that neighborhood.”
I’m not smart enough to understand how this transformation would work or spread or gain any kind of traction in a population, so I’ll just point you to the two articles that make the claim:

I obviously find this pretty shocking and offensive… It is sad to hear that people have a low opinion of Canada, but it is even sadder to hear that there is a need for a “code word” for African Americans in order to mask racist speech and actions.
It’s completely unbelievable, isn’t it? I’m totally mystified by it.
I can simply verify as fact the use of “Canadian” to refer to African-Ameiricans. While I was not sharp enough to inuit it, I suspect you are correct that it is often a substitute for the “N” word.