Key Takeaways
- Canada has no intention of pursuing a free trade deal with China, according to Prime Minister Mark Carney
- The country respects its obligations under the Canada-U.S.-Mexico trade agreement (CUSMA) and will not pursue a free trade agreement without notifying the other two parties
- U.S. President Donald Trump has threatened to impose a 100% tariff on Canadian exports if Ottawa makes a deal with Beijing
- Canada and China have reached a preliminary agreement to lower tariffs on select goods, including electric vehicles and agricultural exports
- The agreement is seen as a way to rectify issues that have developed in the last couple of years and is consistent with CUSMA
Introduction to the Canada-China Trade Agreement
The recent statement by Canadian Prime Minister Mark Carney that Canada has "no intention" of pursuing a free trade deal with China has sparked a heated debate about the country’s trade relationships with its largest trading partners. This statement comes after U.S. President Donald Trump threatened to impose a 100% tariff on Canadian exports if Ottawa were to make a deal with Beijing. The situation is complex, with Canada seeking to balance its trade relationships with both the U.S. and China, while also respecting its obligations under the Canada-U.S.-Mexico trade agreement (CUSMA).
The CUSMA Agreement and Its Implications
The CUSMA agreement, also known as the USMCA in the U.S., is a trade agreement between Canada, the U.S., and Mexico that aims to reduce tariffs and other trade barriers between the three countries. The agreement has been in effect since 2020 and has had a significant impact on trade between the three countries. However, the agreement also includes provisions that require the three countries to notify each other of any trade agreements they intend to pursue with other countries. This provision is intended to prevent any of the three countries from pursuing trade agreements that could undermine the CUSMA agreement. In this context, Carney’s statement that Canada will not pursue a free trade agreement with China without notifying the other two parties is a reaffirmation of Canada’s commitment to the CUSMA agreement.
The U.S.-Canada Trade Relationship
The trade relationship between the U.S. and Canada is complex and has been subject to significant tensions in recent years. The U.S. is Canada’s largest trading partner, and the two countries have a long history of trade cooperation. However, the relationship has been strained in recent years due to disagreements over trade policies, including the imposition of tariffs on Canadian goods by the U.S. In August 2025, Trump raised tariffs on Canadian goods to 35% from 25%, which has had a significant impact on Canadian exports to the U.S. The situation has been further complicated by Trump’s statement that Canada "lives because of the United States," which has been seen as a threat to Canada’s sovereignty and independence.
The Canada-China Trade Agreement
Despite the tensions with the U.S., Canada has been seeking to diversify its trade relationships and has recently reached a preliminary agreement with China to lower tariffs on select goods. The agreement, which was concluded on January 16, allows for the importation of 49,000 Chinese electric vehicles into the Canadian market at a lowered tariff rate of 6.1%. In return, China will cut duties on Canadian agricultural exports, including canola seed oil, which will see tariffs drop to 15% from March 1, down from the current 85%. The agreement is seen as a way to rectify issues that have developed in the last couple of years and is consistent with CUSMA. Carney has stated that the agreement is "entirely consistent with CUSMA" and that Canada has "no intention" of pursuing a free trade deal with China.
Conclusion and Future Implications
In conclusion, the trade relationship between Canada, the U.S., and China is complex and subject to significant tensions. Canada’s decision to pursue a preliminary agreement with China has sparked a heated debate about the country’s trade relationships with its largest trading partners. While the agreement is seen as a way to rectify issues that have developed in the last couple of years, it has also raised concerns about the potential impact on the CUSMA agreement and the trade relationship between the U.S. and Canada. As the situation continues to evolve, it is likely that there will be significant implications for trade relationships between the three countries, and it remains to be seen how the situation will be resolved. One thing is certain, however, and that is that Canada will need to carefully navigate its trade relationships with both the U.S. and China in order to protect its economic interests and maintain its sovereignty and independence.
