Canada inks trade deal with China in break from Trump agenda

China and Canada reached a wide-ranging agreement to lower trade barriers and rebuild ties, signaling a pivot in Canadian foreign policy and a break from alignment with President Donald Trump’s trade agenda.

Prime Minister Mark Carney said he expects China to cut tariffs on Canadian rapeseed, also known as canola, after meeting Chinese leader Xi Jinping on Friday, in the first visit by a Canadian leader to Beijing in eight years.

In tandem, Canada will allow 49,000 Chinese electric vehicles into its market at a tariff rate of about 6%, removing a 100% surtax. China will also offer visa-free travel to Canadians, Carney said.

The moves marked a sharp reversal from the era of former Prime Minister Justin Trudeau. Under the previous administration, ties between Canada and China all but collapsed following the 2018 extradition spat involving a senior Huawei executive.

China’s subsequent detention of two Canadians and years of retaliatory trade measures turned the relationship into a deep freeze. Now, Carney’s warming to Xi suggests a new strategic direction for a nation long considered Washington’s closest partner.

“If this marks a genuine about-face for Canada and not just another reactionary flip-flop then we should acknowledge it as a possible inflection point,” said Josef Gregory Mahoney, a professor of international relations at Shanghai’s East China Normal University.

The centerpieces of the agreement are tariff concessions. Carney anticipates a drop in canola tariffs from more than 80% to about 15% combined by March 1, citing “a high degree of confidence that that’s going to happen.”

Following the announcement, canola futures in New York extended gains to 2.6%, reaching their highest level since early December, before paring gains. Traders see more demand from Canada’s second-largest market.

Carney also said Beijing will suspend anti-discrimination duties on other farm products. This includes canola meal and lobsters, with the suspension expected to last from March through at least the end of 2026.

The reduction in electric vehicle tariffs is perhaps the most striking component of the deal. In 2024, Canada matched the Biden administration’s 100% levy to align with U.S. trade policy, but Carney’s move suggests he will chart an independent course.

The number of Chinese EVs being allowed at the lower tariff rate is small — it amounts to less than 3% of the Canadian vehicle market — but the decision still brought a negative reaction within Canada. “China now has a foothold in the Canadian market and will use it to their full advantage at the expense of Canadian workers,” Ontario Premier Doug Ford said.

Carney hailed his strategic partnership with Xi, touting the importance of their ties in the face of a “new world order.” This was a veiled reference to the global instability caused by President Trump’s foreign policy swings and disruptive trade agenda.

“I’m extremely pleased that we are moving ahead with our new strategic partnership,” Carney told Xi on Friday. A day earlier, he told Chinese Premier Li Qiang that their strengthening relationship “sets us up well for the new world order.”

Asked whether he still sees China as Canada’s top security threat at a press conference on Friday, Carney said the security landscape continues to change. The multilateral system has been eroded and it remains to be seen what gets built in its place, he added.

Dylan Loh, an associate professor at Nanyang Technological University, called Carney’s comments an endorsement of China and an indictment of the U.S. “I won’t go so far as to say it’s a break with the U.S., but it will certainly displease Trump,” he said.

But Trump’s public reaction wasn’t negative. “That’s OK, that’s what he should be doing,” the president said of Carney at the White House on Friday afternoon. “It’s a good thing for him to sign a trade deal. If you can get a deal with China you should do that.”

USMCA review

The detente between Canada and China comes in the midst of Trump’s trade war that has seen the U.S. put tariffs on goods from American allies and adversaries alike. At the same time, the president has brought Russia’s Vladimir Putin out of isolation, stunned the world by deposing Venezuela’s leader and made invasion threats toward Greenland, a semi-autonomous territory of NATO member Denmark.

Carney’s trip overseas is happening just as Canada and Mexico gear up for difficult negotiations with Trump on the North American free trade pact known as USMCA. U.S. officials have put pressure on its neighbors to erect barriers to Chinese products ahead of those talks.

“The threat against Greenland is a threat against Canada,” Mahoney added. He suggested that by drawing closer to China, Carney may be looking for leverage to use in the talks with Washington.

Carney, who frequently talks about the Canada-U.S. relationship as having suffered a historic “rupture,” called for a new approach to China, “adapted to new global realities,” in his meeting with Xi.

Xi expressed optimism, noting “positive results” in restoring ties.

“The healthy and stable development of China-Canada relations serves the common interests of our two countries and is also conducive to world peace, stability and prosperity,” he said.

A joint statement released by both governments says that they will expand trade, strengthen investment and deepen cooperation in various fields, including energy, finance, public security and people-to-people exchange.

Canada reaffirmed its commitment to its long-standing One-China Policy, according to the statement. Under that approach, Canada recognizes the People’s Republic as the sole legitimate government of China without endorsing or challenging the Chinese position on Taiwan, the self-ruled democracy claimed by Beijing.

Despite the warming tone, Carney is walking a fine line. Vina Nadjibulla of the Asia Pacific Foundation of Canada described the visit as a move toward a “pragmatic foreign policy” that focuses on economics while deprioritizing traditional irritants.

“He wants to engage selectively,” Nadjibulla told Bloomberg Television. The focus is on laying foundations for economic and trade relations, while keeping certain sectors like defense and artificial intelligence behind strict guardrails, she added.

Carney is among a stream of leaders including the UK’s Keir Starmer and Germany’s Friedrich Merz making trips to Beijing early this year to rebuild ties after the U.S. and China stabilized relations with a trade truce.

Speaking to reporters on Thursday, Canadian Industry Minister Melanie Joly, who as foreign minister in 2022 labeled China an “increasingly disruptive global power,” said the goal now is to bring stability to the relationship between the two nations.

“You know what? The conversations here have been more predictable and stable than sometimes with other countries, including our neighbor,” she said.

(With assistance from Hallie Gu, Derek Decloet, Haslinda Amin, Laura Dhillon Kane, Courtney Subramanian and Melissa Shin.)