Canada Seeks Stronger Economic Ties with China as U.S. Trade Relations Grow Uncertain

Canada is recalibrating its foreign trade strategy in response to ongoing unpredictability in its relationship with the United States. After facing new tariffs and threats from the U.S., the Canadian government has initiated a strategic partnership with China, aiming to diversify its economic alliances and reduce reliance on its southern neighbor.

During a recent visit to Beijing, Canadian Prime Minister Mark Carney met with Chinese President Xi Jinping and Premier Li Qiang to formalize a series of trade agreements. This visit marked the first official trip by a Canadian head of government to China since 2017 and resulted in significant commitments from both sides to lower trade barriers.

Under the new agreements, Canada will substantially reduce import tariffs on Chinese electric vehicles, dropping them from 100 percent to 6.1 percent. This change will allow up to 49,000 Chinese electric vehicles to enter the Canadian market. In exchange, China has agreed to lower its tariffs on Canadian agricultural exports, particularly canola, which had been subject to an 84 percent duty. The new rate of 15 percent is expected to provide much-needed relief to Canadian farmers, especially in Western regions, who have been adversely affected by previous Chinese import restrictions.

The shift in trade policy comes after several years of strained relations between Canada and China, which were exacerbated by diplomatic incidents in 2018 and 2021. Despite the release of detained citizens on both sides, trade relations remained tense, with both countries imposing reciprocal tariffs on key imports, including vehicles, steel, aluminum, and agricultural products.

Canada's renewed engagement with China coincides with the upcoming review of the Canada-United States-Mexico Agreement (CUSMA), a trilateral trade pact that is vital to the Canadian economy. Approximately 70 percent of Canadian exports currently go to the U.S., making American market access critical for major sectors such as automotive manufacturing. However, recent statements by U.S. President Donald Trump have cast doubt on the future of CUSMA, as he has downplayed the agreement's relevance and signaled a willingness to disrupt established supply chains.

While President Trump expressed an unexpectedly neutral view on Canada's deal with China, the U.S. Trade Representative has voiced concerns, particularly over the potential influx of Chinese electric vehicles into North America. Canadian provincial leaders, especially in Ontario--the center of the nation's auto industry--have also raised alarms about the impact of increased competition from subsidized Chinese manufacturers and have cited cybersecurity issues related to connected vehicles.

In light of these developments, the Canadian government is pursuing a policy aimed at reducing economic vulnerability by expanding trade partnerships beyond the U.S. The goal is to double trade volumes with other global markets over the next decade, thereby safeguarding key industries from the volatility associated with U.S. policy shifts.

Experts note that this approach reflects a significant adjustment in Canada's global trade policy, driven by the need for more stable and predictable partnerships. Observers have highlighted that, in recent months, China has demonstrated a greater degree of consistency in trade negotiations compared to the fluctuating stance of the U.S. administration.

The ongoing evolution of Canada's international trade relationships underscores the broader geopolitical shifts impacting global commerce. As Canada seeks to balance its longstanding economic ties to the U.S. with new opportunities in Asia, policymakers are working to ensure the country's economic resilience in an increasingly multipolar world.