Canada and China Strike Landmark Trade Agreement
Canada and China have reached a comprehensive agreement to lower trade barriers and rebuild diplomatic ties. This move signals a notable pivot in Canadian foreign policy. It represents a clear break from alignment with former President Donald Trump's trade agenda.
Key Concessions and Tariff Reductions
Prime Minister Mark Carney announced the deal following a meeting with Chinese leader Xi Jinping on Friday. This visit marked the first by a Canadian leader to Beijing in eight years. Carney expressed confidence that China will significantly cut tariffs on Canadian rapeseed, commonly known as canola.
The agreement includes several major components:
- China is expected to reduce canola tariffs from over 80% to approximately 15% by March 1.
- Canada will permit 49,000 Chinese electric vehicles to enter its market at a drastically reduced tariff rate of about 6%, down from the current 100%.
- China will offer visa-free travel to Canadian citizens.
- Beijing will suspend anti-discrimination duties on other Canadian agricultural products, including canola meal and lobsters, from March through at least the end of 2026.
Following the announcement, canola futures in New York surged, gaining 2.6% and reaching their highest level since early December. Traders anticipate increased demand from China, which is Canada's second-largest market for the crop.
A Dramatic Reversal from Previous Tensions
This deal marks a sharp reversal from the strained relations under former Prime Minister Justin Trudeau. Ties between the two nations nearly collapsed after the 2018 extradition dispute involving a senior Huawei executive. China's subsequent detention of two Canadians and years of retaliatory trade measures had frozen the relationship.
Carney's warming approach to Xi suggests a new strategic direction for Canada. The nation has long been considered Washington's closest partner. Professor Josef Gregory Mahoney of Shanghai's East China Normal University commented on the shift. He said if this represents a genuine change in policy and not a temporary reaction, it could be a significant inflection point.
Domestic and International Reactions
The reduction in electric vehicle tariffs is perhaps the most striking part of the agreement. In 2024, Canada had matched the Biden administration's 100% levy to align with US trade policy. Carney's move indicates he may chart a more independent course.
The number of Chinese EVs allowed at the lower tariff is relatively small, amounting to less than 3% of the Canadian vehicle market. However, the decision still drew criticism within Canada. Ontario Premier Doug Ford expressed concern, stating that China now has a foothold in the Canadian market which it will use to its advantage, potentially at the expense of Canadian workers.
Carney emphasized the importance of the new strategic partnership with China. He spoke about adapting to "new global realities" in his meeting with Xi. This was seen as a veiled reference to the instability caused by Trump's foreign policy and disruptive trade agenda.
When asked at a press conference if he still views China as Canada's top security threat, Carney noted that the security landscape is continuously changing. He added that the multilateral system has been eroded, and it remains unclear what will replace it.
Associate Professor Dylan Loh of Nanyang Technological University interpreted Carney's comments as an endorsement of China and a critique of the US. He suggested that while it may not be a complete break with the US, it would certainly displease Trump.
Surprisingly, Trump's public reaction was not negative. Speaking at the White House, he said it was okay and that Carney should be doing such deals. He remarked that signing a trade deal with China is a good thing if you can get it.
Broader Geopolitical Context
This détente between Canada and China occurs amidst Trump's broader trade war. The US has imposed tariffs on goods from both allies and adversaries. Simultaneously, Trump has engaged with Russia's Vladimir Putin, intervened in Venezuela, and made threats toward Greenland.
Carney's trip to China coincides with Canada and Mexico preparing for difficult negotiations with the US on the USMCA trade pact. US officials have pressured its neighbors to erect barriers against Chinese products ahead of these talks.
Professor Mahoney suggested that by moving closer to China, Carney might be seeking leverage for the upcoming discussions with Washington. Carney himself has frequently described the Canada-US relationship as having suffered a historic rupture.
Official Statements and Future Cooperation
Xi Jinping expressed optimism about the restored ties, noting positive results. He stated that the healthy development of China-Canada relations serves the common interests of both countries and contributes to global peace and prosperity.
A joint government statement outlined plans to expand trade, strengthen investment, and deepen cooperation in various fields. These include energy, finance, public security, and people-to-people exchanges. Canada also reaffirmed its commitment to the One-China Policy, recognizing the People's Republic as the sole legitimate government of China.
Despite the warming tone, Carney is navigating a complex path. Vina Nadjibulla of the Asia Pacific Foundation of Canada described the visit as a move toward a pragmatic foreign policy. This approach focuses on economics while deprioritizing traditional points of contention. She noted that the focus is on building economic and trade relations, while keeping sensitive sectors like defense and artificial intelligence under strict controls.
Carney is among several Western leaders, including the UK's Keir Starmer and Germany's Friedrich Merz, visiting Beijing early this year to rebuild ties. This follows the stabilization of US-China relations through a trade truce.
Canadian Industry Minister Melanie Joly, who previously labeled China a disruptive global power, now emphasizes bringing stability to the relationship. She remarked that recent conversations with China have been more predictable and stable than those with some other countries, including Canada's neighbor.
The agreement between Canada and China represents a significant recalibration of international trade dynamics. It highlights a shift toward economic pragmatism amid evolving global alliances and uncertainties.
