The Canadian Relationship with China

Welcome back to TAXING TARIFFS! In this post we’ll look at the Canadian trade relationship with China.

Over the frigid weekend of January 21st as a polar arctic blast pressed down upon the United States, the U.S. relationship with Canada went into a deep freeze. Donald Trump once again threatened tariff retaliations if Canadian Prime Minister Mike Carney’s government “ … makes a deal with China.” One hundred percent tariffs was the particular level given as a potential penalty for the unspecified relationship. While the Chinese are trying to warm up to the Canadians, the U.S. is doing its best to give them the cold shoulder.

Taking a closer look at the Canadian and Chinese relationship one sees that the Chinese are Canada’s second-largest trading partner. Some perspective here is do. Counting annual trade in both directions between two countries, China amounts to approximately $80 billion. Canada’s largest trading partner is the U.S. which accounts for about $1 trillion. Canada’s trade with the U.S. is an order of magnitude bigger in dollar value than its trade with China. Nonetheless, there is a trade deal afoot between Canada and China.

Earlier in the month of January, Prime Minister Mark Carney and his delegation met with Chinese President Xi Jinping and his delegation in the Great Hall of the People in Beijing, China. According to CBC News (a division of the Canadian Broadcasting Corporation) the Canadian government has agreed to allow 49,000 Chinese electric vehicles into the market at a tariff rate of 6.1%. That would be a reversion to the rate that was in place before the Ottawa government placed a 100% tariff on all Chinese EVs in 2024. China, in return, is expected to lower tariffs on Canadian canola to 15% by March. In addition, Beijing has promised to remove tariffs on Canadian canola meal, lobsters, crab, and peas as of March until at least the end of 2026. There was also talk of progress on issues around Canadian pork exports. A deal has been struck between China and Canada.

This deal was born on the bed of the tit for tat tariff slap match that took place a year ago. Then-prime minister Justin Trudeau placed a 100% tariff on Chinese electric vehicles starting in the summer of 2024. China responded by launching an anti-dumping investigation of their Canadian canola imports. In March of 2025, Beijing placed a 100% tariff on Canadian canola oil, canola meal, and peas. To this they added a 25% tariff on pork and various seafood products. Not to leave any canola product unaffected, in August China slapped a 76% tariff on Canadian canola seed. This is what Mark Carney inherited in March 2025.

Because of the almost lockstep move in implementing 100% tariffs by both the U.S. and Canada, there was, and is, concern over the continental agreement between Mexico, the U.S. and Canada. This agreement, which by the way, the U.S. calls USMCA (United States – Mexico -Canada Agreement) and Canada calls CUSMA (Canada – U.S. – Mexico Agreement) allows for trade with low or no tariffs between the three countries. In mid January Trump acknowledged his approval for a Canadian deal with China, even going so far as to say “If you can get a deal with China, you should do that.” However, U.S. Trade Representative Jamieson Greer had a different take on the deal. Relating to CNBC that he thought Canada would regret making such a deal, saying “I think it’s problematic for Canada.” From current events it would seem that the U.S. Trade Representative has caught the ear of the President.

According to the Trade Data Online of the Government of Canada available at the ised-isde.canada.ca website China’s total trade with Canada in 2024 was $86.8 billion in current U.S. dollars. Chinese imports to Canada exceeded Canadian exports to China by $43 billion. With all other trading partners, it had a positive trade balance of $53 billion. Also in 2024, Canadians imported $1.56 billion of Chinese motor vehicles (which includes electric motor vehicles) under NAICS code 336110 – automobile and light duty motor vehicle manufacturing. $51.6 billion of the same was imported from all other countries. 32 times more vehicles were imported to Canada from the rest of the world than from China. And yet, China is Canada’s second largest trading partner overall.

China has struck a group of tariff deals with Canada. Now Trump wants to slap tariffs on Canada for playing nice with China. Or perhaps more particularly, for allowing 49,000 relatively inexpensive Chinese electric vehicles into North America.

What do you think about the tit for tat tariff exchanges between trading partners? Is it good or bad for North America if Canada allows 49,000 Chinese EVs imports? Is it appropriate for a President to use tariffs to punish a neighbor, an ally, and trading partner for making a deal? Once you’ve sent your answers to taxingtariffs@microncorp.com we’ll see you next time on TAXING TARIFFS.