Carney moves to ease Canada-China trade frictions under US shadow

SHENZHEN – China and Canada agreed to roll back some of their most contentious trade barriers in a reset of bilateral relations, as Canadian Prime Minister Mark Carney sought closer economic ties with Beijing while balancing relations with the United States.

Ottawa will allow limited imports of Chinese electric vehicles at standard tariff rates, while China is expected to cut steep retaliatory levies on Canadian canola and other agricultural products from March, said Mr Carney

after meeting Chinese President Xi Jinping

in Beijing on Jan 16.

The significance of Mr Carney’s China visit – the first by a Canadian prime minister since 2017 – is sharpened by strains in Canada’s relationship with its closest ally.

Amid the US tariffs on Canada and uncertainty ahead of a mandatory review of the Canada-United States-Mexico free trade agreement in 2026, Ottawa has sought to diversify economic ties.

Analysts say that even as China scores diplomatic gains from the US’ ongoing trade war, the rapprochement reflects a pragmatic recalibration on Canada’s part rather than a geopolitical pivot, in the light of its continued economic and security dependence on the US.

China and Canada are forging a “new strategic partnership” which Mr Carney said would not just deepen bilateral ties, but also help improve the global multilateral system which in recent years had come under “great strain”.

“Together, we can build on the best of what this relationship has been in the past, to create a new one adapted to new global realities,” he told Mr Xi on Jan 16.

Ties between both countries took a nosedive in 2018, when Canada detained a senior Huawei executive at the US’ request. China retaliated by detaining two Canadian citizens.

Tensions flared again in 2024 when Canada followed the US in imposing 100 per cent tariffs on Chinese electric vehicles, citing unfair competition from state subsidies.

China hit back with tariffs on Canadian canola and other agricultural products, measures that hurt Canadian farmers and became a major source of bilateral friction.

The agreements announced on Jan 16 mark the first concrete easing of those tensions, with Ottawa saying it had secured a preliminary agreement for China to roll back punitive levies on canola and other farm products from March 1.

Under the arrangement, Canada will allow up to 49,000 Chinese-made electric vehicles into its market at a most-favoured-nation tariff rate of 6.1 per cent, marking a departure from its previous US-aligned policy of blanket duties.

Canada, in turn, expects China to lower its retaliatory tariffs on Canadian canola seed – from a combined rate of about 85 per cent to 15 per cent – and unwind anti-discrimination tariffs on canola meal, lobsters, crabs and peas.

These will “help unlock nearly $3 billion in export orders for Canadian workers and businesses”, a Canadian government statement said.

Strengthening trade and economic cooperation with the world’s second-largest economy was a key focus of Mr Carney’s visit.

By 2030, Canada aims to increase its exports to China by 50 per cent, a Canadian government statement said.

China is Canada’s second-largest export destination but accounts for just 4 per cent of Canada’s total shipments, according to Canadian data for the first 10 months of 2025. By contrast, the US’ share was 72 per cent.

During the visit, Canada and China also agreed to strengthen two-way investment, and launch or renew dialogue mechanisms in sectors such as the economy, trade, energy, agriculture, finance and culture, according to a joint statement released by both governments.

Analysts note that while Mr Carney’s visit marks a recalibration of Canada’s relations with China, there are limits to how far this can go, as the US still looms large in Ottawa’s calculus.

America’s outsized importance to Canada’s economy “ensures there will always be a US dimension to any serious China-engagement calculus – especially under a more mercurial and unpredictable President Trump”, said Mr L. Philippe Rheault, a former Canadian diplomat who is now director of the University of Alberta’s China Institute.

“Canada’s challenge is to choose areas of cooperation with China that do not directly trigger US strategic sensitivities,” he added.

Even as China-Canada ties improve in the economic, diplomatic and other spheres, Canada, as a US ally, “will definitely follow the US on issues of security”, noted Professor Wu Xinbo, dean of Fudan University’s Institute of International Studies.

The limits are shaped in part by Mr Trump’s sharper assertion of US primacy in the Western hemisphere that leaves less room for strategic manoeuvre by close allies, analysts say.

Washington’s use of tariffs and its insistence on tighter continental alignment have raised sensitivities around any move that could be seen as opening North America to greater Chinese influence.

But still, the US’ tariffs and emphasis on dominating the Western hemisphere have created important opportunities for China, Prof Wu said.

Beijing can move to develop stronger economic and trade relations with countries affected by the tariffs, and also has more room for active diplomacy in places like Asia, Africa and Europe, he said.