This week’s edition of IPD’s Canada-China Brief covers Mark Carney’s vow to hold talks with his counterpart President Xi Jinping amid the federal election campaign and divisions on Ottawa's levies on China. With Beijing’s retaliation and Washington’s tariffs in effect, we break down the numbers that matter. Key highlights include:
Domestic divisions: Prairie premiers argue Ottawa’s China tariffs disproportionately benefit Eastern Canada
Beijing signals openness: Ambassador Wang Di repeatedly states willingness to resolve trade dispute
Shifting exports: Canadian products hit by Chinese tariffs have increasingly redirected to the U.S. market, reinforcing trade dependence on Washington
Endurance under pressure: Comparing Canadian and Chinese economic resilience under U.S. trade pressure reveals diverging long-term strategies
Tariff exposure: IPD explores the share of tariffed Chinese goods at the provincial level, highlighting where economic strain is most acute
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Data Dive
With Beijing’s retaliatory tariffs and Washington’s global levies in place, IPD highlights the numbers that matter. See more data analysis below the paywall cut.
Nearly $3 billion: China’s retaliatory tariffs on Canadian agricultural and seafood exports last month impact approximately $2.9 billion in value.
The takeaways:
Canadian seafood exports are most impacted with China’s 25% levies hitting $1.2 billion
In the impacted product categories, China purchased 25% of Canada’s exported value in 2019, but this has since fallen
American tariffs have skyrocketed: U.S. tariff rates on Chinese exports have surged by more than tenfold since the start of the U.S.-China trade war in 2018.
The takeaways:
Before today, the second Trump administration raised average tariffs on Chinese goods by 20%
Since 2018, China cut average tariffs on global imports from 8% to 6.5%, while U.S. levies rose from 2.2% to 3.8%
If you’d like access to the extended segment of our Data Dive — featuring insights on the value of Canadian goods tariffed by China, their diversion to the U.S. market, as well as the share of tariffed Chinese goods amongst provinces — subscribe now and also fully access The Word in China to read Chinese views on these developments.
From the Experts
On Canada-China trade relations under the shadow of U.S. tariffs:
Mark Kruger
Senior Fellow, Yicai Research Institute, University of Alberta China Institute, Centre for International Governance Innovation
Can closer commercial relations with China help mitigate the economic damage President Trump’s tariffs are inflicting on the Canadian economy? There is no doubt. The two economies are complementary and both would benefit from greater bilateral trade and investment. However, the Canadian public is deeply mistrustful of the Chinese government’s intentions. This makes it difficult for Canadian politicians to re-engage with China, especially in the run-up to an election.
Once the election is decided, the Canadian and Chinese governments could support confidence building. Moreover, the Canadian government could roll back its tariffs on Chinese electric vehicles, steel and aluminum, which did little to protect the Canadian worker or build up goodwill with our American neighbours. Similarly, the Chinese could cancel their tariffs on Canadian canola and other agricultural products.
While it would still be politically risky to engage China in a restart of the free trade negotiations, Canada could use China’s request to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to very similar effect. Working through a multinational agreement would give Canadian politicians cover while allowing the economy to capture the benefits from increased trade and investment.
If China joins the CPTPP, foreign firms will have better access to its service sector. This would be welcome news for Canada. Between 2010 and 2023, Canada’s service exports to China have grown twice as fast as its goods exports (Figure 1). And exports of commercial services have grown especially rapidly. China’s accession to the CPTPP would further expedite this process. In addition, by accepting the CPTPP’s rules which, in many instances, are more exigent than those of the WTO, China would give the other members confidence that it will be a trustworthy partner.
Alex He
Senior Fellow, Centre for International Governance Innovation
China’s retaliatory tariffs came at the worst possible time, exacerbating an already challenging situation for Canada’s exports, trade, and economy. Meanwhile, China has expressed interest in increasing bilateral trade. In an interview with the Globe and Mail, the Chinese ambassador to Canada hinted at resuming free trade agreement talks that have been stalled for years, but with China waiting for Canada to take the first step.
Relations among Canada, China, and the United States have now become more complex. It is no longer a simple U.S.-Canada alliance against China when Trump’s unjustified tariffs and “America First” policies now threaten Canada’s economy and millions of jobs. The key for a smaller player in this triangular relationship is to align with one country to confront the bully or to ease relations with both. This is the optimal strategy for Ottawa to navigate its trade disputes with both Washington and Beijing. The worst-case scenario for a lightweight player like Canada in this geopolitical and geoeconomic competition would be to antagonize both heavyweight players simultaneously.
Carney’s cautious stance on Canada-China bilateral trade is an understandable and reasonable response, given the ongoing mutual distrust between the two countries. Strengthening trade relations with the European Union is a good strategy. However, improving trade relations with China should be pursued with the mindset that “the more, the better.” This is especially important in the face of unjust and potentially devastating Trump tariffs. Even though improving bilateral trade with China may be uncertain and could be disrupted by sudden political events, the unpredictability and hostility of Trump’s policies toward Canada make it worthwhile to try improving trade relations with China — on the condition that retaliatory tariffs are canceled on both sides.
The first step could involve negotiating the cancellation of the 100% on Chinese EVs in exchange for the cancellation of the 100% tariffs on canola oil, oil cakes and pea imports. There are three reasons for this approach. First, the tariff on Chinese EVs was a coordinated move with the Biden administration, and it no longer makes sense to continue it under the Trump administration, which has taken a hostile stance towards Canada and imposed unjust tariffs on Canadian goods. Second, cancelling tariffs on Chinese EVs would have minimal impact on Canada’s EV industry and EV market. Chinese EV imports in 2024 (CAD $1.365 billion) account for only 13% of Canada’s total EV imports (CAD $10.358 billion) according to Trade Data Online. It does not make much sense to argue that the 100% tariff on imported Chinese EVs protects Canada’s nascent EV industry. Third, the majority of these Chinese EVs imports are Teslas made in China. Canceling the tariffs would be a gesture to Elon Musk, Trump’s closest ally in D.C., and would avoid further deteriorating relations with the Trump administration.
The second step could involve responding to China by initiating low-profile trade dialogues, conditioned on the cancellation of the 25% tariff on Canadian aquatic products and pork. These trade talks would likely take years, and many developments could occur in the meantime. However, the symbolic value of such talks would be significant. The overall tense atmosphere in Canada-China relations could be eased, putting Canada in a better position within the triangular relationship. It could also open the door for further discussions and engagements, such as the potential for China to import more Canadian LNG and agricultural products.
The Word in China
IPD brings what scholars and opinion leaders in China have to say on Canada and the challenges both countries face. See more translated commentary below the paywall cut.
Chen Qi
Deputy Director, Center for Strategic and Security Studies, Tsinghua University | READ
[Canada and Mexico] managed to secure a temporary delay in the tariff hike. However, this did not mean the U.S. had abandoned the idea of using trade measures against them in the future. The U.S. strategy went further, leveraging Canada and Mexico’s heavy reliance on the American market to extract ongoing benefits. For example, by demanding Canada open its oil exploration and extraction rights to U.S. companies, or pressuring Mexico to restrict Chinese companies from setting up factories there or rerouting Chinese goods into the U.S. through Mexico. Similar tactics have been seen in U.S. trade policy toward Europe. However, this approach is less effective against China which, after years of facing America’s maximum pressure, has gained significant experience in handling such tactics and has effectively reduced its dependence on the U.S. market.
[…] Essentially, the U.S. government's trade protection measures are about using its dominant market position and economic power to exert maximum pressure on other countries in order to extract more non-competitive economic and political benefits. This reflects the reality that the slogan ‘Make America Great Again’ is facing serious domestic challenges.
Yang Hangjun
Vice Dean, School of International Trade and Economics, University of International Business and Economics | READ
Canada seems to be imposing additional tariffs on China to appease the U.S. This strategy may ultimately backfire. Every country has its own interests, and blindly following the policies of another country may come at the expense of its own interests. Canada should prioritize its own interests, take a prudent approach to its trade policies with China, and avoid short-sighted decisions that could undermine its long-term well-being.
China has consistently advocated for resolving trade disputes through dialogue and consultation while firmly opposing all forms of trade protectionism. Hopefully, Canada will recognize the gravity of the issue, adhere to WTO rules, and rescind its discriminatory tariffs on Chinese goods. By fostering the healthy and stable development of bilateral economic and trade relationships in collaboration with China, both countries stand to reap the benefits.
Top Story
Carney Puts Trade Talks With Xi on the Table
Putting Xi on the line — After a huddle with the provinces late last month, premiers reported that Carney made a promise to raise trade disputes with China:
Manitoba Premier Wab Kinew told the press that “the Prime Minister committed to engaging directly with President Xi on this issue,” saying that “it’s an important priority. We need to show that there's a path forward here, that there's hope for the canola producers, for the pork industry, for the pork processors.”
Kinew criticized Ottawa’s tariffs and withheld rebates on Chinese EVs, labelling them “a largely symbolic gesture because we're not aware… of any rebates going out from Manitoba to Chinese-manufactured vehicles. We're prepared to remove that though if there is a path forward here on canola and pork being tariff-free.”
He added that Carney ”needs to engage with the PRC and ensure that our agricultural interests are top of mind,” but acknowledged that “the complicating factor is that anything that happens through that engagement with the PRC can potentially also impact the relationship with the U.S.”
Kinew was not alone, with Saskatchewan’s Scott Moe frankly calling Chinese counter-levies “the most urgent and the most immediate [tariffs] that needs action. I don’t know if we can solve it but we ought to try, and I would ask the Prime Minister to make that phone call [to China] before you go to an election.”
Moe also recently said the PM “should be reaching out to China like they are to the United States if they're truly serious about defending all of the jobs in Canada… there needs to be an equal response on behalf of all Canadians from whoever the federal government is and whoever the Prime Minister is.”
Mixed messaging? — As Carney hit the stump after last month’s election call, however, he has also distanced himself from rekindling economic ties:
In public remarks a week after his meeting with premiers, Carney stated that “we want to diversify with like-minded partners. That’s why I went to Europe in my first days as Prime Minister… there are partners in Asia that we can build deeper ties [with], but the partners in Asia that share our values don't include China.”
In the same press conference, the Prime Minister acknowledged that “it's our second largest trading partner,” sharing his view that “we have trade disputes with China right now, caused by them” but that “the agriculture sector is one of the areas we need to engage on.”
Carney also left an ambiguous opening on EVs, saying “on the future of the auto sector, we've got to understand where China is, where China is going, and whether or not there's any room for partnership in that” as "there's certain activity that we could have with China… but we have to be very careful, very deliberate.”
The campaign rhetoric comes as Ottawa filed consultations the week before at the World Trade Organization to dispute Chinese retaliation, calling Beijing’s first-ever trade antidiscrimination probe into Canadian EV tariffs and its findings “inconsistent” with China’s WTO obligations.
Provincial infighting — Ontario’s auto industry has been in the crosshairs for Prairie premiers with the view that Ottawa’s tariffs on China favour Eastern Canada:
Ontario Premier Doug Ford reaffirmed that he would “continue to support aligning tariffs against economic adversaries,” adding “if we want the U.S. to exempt us from their tariffs, we must demonstrate our willingness to take appropriate steps against countries that undermine our shared economic success.”
The stance has been under fire from Saskatchewan’s Moe, who amplified Sylvain Charlebois, Director of Dalhousie University’s Agri-Food Analytics Lab, saying that “to end our trade war with China, all we need to do is rescind the decision made in October to tariff imported Chinese EVs — which we don’t even import yet.”
In an interview last week, Moe called Beijing’s retaliatory tariffs “a response to a Liberal policy on trying to protect the EV industry in Eastern Canada,” noting a “tremendous impact on the Saskatchewan agriculture sector, really at the expense of protecting an industry that isn't that large — the EV sector in Eastern Canada.”
He went on to say that with China “you may not agree with much of what they do. However, you do need to have a relationship with them… We don't have to like or agree with other countries' views on a number of things” but ”you have to have the ability to reach out and resolve differences when it comes to trade.”
Beijing open to deal — Ambassador Wang Di has taken to the media circuit over the past several weeks to repeat China’s willingness to close the trade dispute:
Wang expressed hope to the Globe & Mail that Ottawa “rectify its wrongdoings [on tariffs], then this problem will be resolved,” adding “if Canada does not continue to implement the discriminatory measures against China, then I think it would not be necessary for China’s countermeasures to continue to exist.”
Saying that “co-operation should not be determined by any other third party,” he revealed that Chinese automaker BYD’s tentative investment into Canada “met huge difficulties, restrictions and obstruction, and they had to give up the idea of investing” and “moved to other countries.”
On a potential free trade agreement, Wang noted that “China wants to have more FTAs with more countries, and that, of course, includes Canada,” going on to say that “what really matters and what matters more is the political willingness” rather than differences on any agreement’s technical matters.
In a separate media interview, Wang stressed that “the countermeasures taken by the Chinese government are not of permanent nature. They are a reaction to the unilateral tariffs imposed by the Canadian side. So the ball is in the court of the Canadian side.“
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