Prime Minister Mark Carney just executed one of the boldest foreign policy pivots in Canadian history. The former central banker traveled to Beijing last week and returned with a trade agreement that effectively tears up Canada’s alignment with Washington on Chinese electric vehicles while unlocking nearly $3 billion in relief for Canadian farmers crushed by retaliatory tariffs.
The deal cuts Canada’s punishing 100% surtax on Chinese EVs down to 6.1% for up to 49,000 vehicles annually. In exchange, China will slash tariffs on Canadian canola from a devastating 84% to roughly 15% by March 1. The message to Washington is unmistakable: Canada will not wait for permission to pursue its economic interests.
The Beijing Gambit
Carney’s trip marked the first visit by a Canadian prime minister to China since 2017, a diplomatic freeze that began during the Meng Wanzhou extradition crisis and deepened through years of deteriorating relations. The timing was strategic. With Trump’s tariff threats hanging over the Canadian economy and the CUSMA review looming in July 2026, Ottawa needed leverage.
They found it in Beijing.
“At its best, the Canada-China relationship has created massive opportunities for both our peoples,” Carney said after meeting with President Xi Jinping in the Great Hall of the People. “By leveraging our strengths and focusing on trade, energy, agri-food, and areas where we can make huge gains, we are forging a new strategic partnership.”
The agreement goes beyond tariff relief. Both nations pledged to restart high-level economic dialogue, strengthen cooperation in agriculture, oil, gas, and green energy, and establish a framework for Chinese investment in Canada’s clean energy sector. Carney specifically noted opportunities in offshore wind as Canada plans to double its energy grid over the next 15 years.
What the Numbers Actually Mean
The agricultural relief is substantial and immediate. Canadian canola exports to China represented a $4 billion annual market before Beijing imposed retaliatory tariffs in March 2025. Those tariffs, combined with levies on pork, fish, and seafood, triggered a 10.4% slump in China’s imports of Canadian goods last year. The new agreement removes anti-discrimination tariffs on canola meal, lobsters, crabs, and peas effective March 1, unlocking approximately $2.6 billion in agricultural exports.
“It feels like a huge win for us,” Megan Eadie of the B.C. Crab Fishermen’s Association told CBC. “Crab fishermen are feeling hopeful for the first time since March.”
The EV provisions are more politically charged. Canada will allow a quota of 49,000 Chinese vehicles at the most-favored-nation tariff rate of 6.1%, down from the 100% surtax the Trudeau government imposed in October 2024 to match Biden administration policy. That policy shift represents a direct break from the “Fortress North America” approach the U.S. has been pushing to keep Chinese automakers out of the continent.
For context, BYD’s Seagull electric car sells for roughly $10,000 in China. At a 6.1% tariff, Canadian consumers could potentially access electric vehicles at price points that Detroit and its German competitors simply cannot match. The deal includes provisions for potential Chinese joint ventures and investments in Canada’s automotive sector, though specifics remain under negotiation.
Washington’s Mixed Signals
Trump’s reaction landed like a surprise plot twist. Asked about the deal at the White House, the president who has made tariff warfare against China a centerpiece of his trade policy shrugged it off.
“That’s OK. That’s what he should be doing. I mean, it’s a good thing for him to sign a trade deal. If you can get a deal with China, you should do that,” Trump told reporters.
His administration was less sanguine. U.S. Trade Representative Jamieson Greer called the deal “problematic” and warned that Canada would “surely regret” the decision. Transportation Secretary Sean Duffy piled on at a Ford factory event in Ohio, questioning why Ottawa would invite Chinese vehicles into a market where American automakers have historically dominated.
“There’s a reason why we don’t sell a lot of Chinese cars in the United States,” Greer told CNBC. “It’s because we have tariffs to protect American auto workers and Americans from those vehicles.” He added pointedly that any Chinese vehicles entering Canada would not be permitted into the U.S. market.
The conflicting messages reflect a deeper tension in Washington’s approach to North American trade. The administration is simultaneously threatening to let CUSMA expire while expressing concern that Canada is diversifying away from American suppliers. It is a classic case of wanting it both ways, and Carney appears to have called the bluff.
The Domestic Divide
Back home, the deal has split the country along predictable geographic lines. Prairie premiers, whose provinces depend heavily on canola exports, welcomed the agreement with relief bordering on euphoria.
“We’ve been asking in Western Canada, certainly our government here in Manitoba, for an off-ramp for these canola tariffs,” Manitoba Premier Wab Kinew said. “So to see some progress here is welcome news.”
Ontario’s Doug Ford, whose province houses Canada’s automotive industry, was considerably less enthusiastic. The premier blasted the agreement as opening the door to “Chinese subsidized spy cars” and warned that giving China a lower-tariff foothold than the U.S. market would not go over well with Washington.
“The federal government is inviting a flood of cheap made-in-China electric vehicles without any real guarantee of equal or immediate investments in Canada’s economy, auto sector or supply chain,” Ford posted on X. The criticism echoes concerns from Canadian autoworkers’ unions about job losses if Chinese manufacturers capture significant market share without equivalent domestic manufacturing commitments.
The CUSMA Shadow
All of this unfolds against the backdrop of the escalating uncertainty in U.S.-China relations and the mandatory CUSMA review scheduled for July 2026. Under the trade agreement’s Article 34.7, the three North American partners must decide whether to extend the deal for another 16 years, renegotiate its terms, or begin the process of letting it expire by 2036.
Trump has called CUSMA “transitional” and suggested it may have served its purpose. His administration is expected to push for major concessions from Canada on automotive rules of origin, dairy market access, and digital services taxation. The Canada-China deal gives Ottawa a credible alternative trading partner just as those negotiations heat up.
“Given current complexities in Canada’s trade relationship with the U.S., it’s no surprise that Carney’s government is keen to improve the bilateral trade and investment relationship with Beijing,” said Even Rogers Pay of Trivium China. The strategic logic is straightforward: reduce dependence on a market that has become politically hostile, and do it before the leverage disappears entirely.
What Comes Next
The agreement includes a three-year review provision to assess whether anticipated benefits materialize. Federal officials stressed during briefings with provincial premiers that this is a “framework agreement” with significant details still to be negotiated, particularly around Chinese energy investments and potential automotive manufacturing commitments.
For now, the immediate impact falls on Canadian farmers and fishing communities who have been caught in the crossfire of great power competition. The tariff relief, while not quite a return to the pre-conflict status quo, offers meaningful market access at a time when alternative buyers remain limited.
The longer-term implications depend entirely on how Washington responds beyond the initial rhetorical volleys. If Trump’s nonchalance holds, Canada may have successfully demonstrated that it can pursue independent trade policy without catastrophic consequences. If his administration’s warnings prove prescient and CUSMA negotiations turn punitive, Carney’s Beijing gambit could look very different in hindsight.
One thing is clear: the era of automatic Canadian alignment with U.S. trade policy is over. Carney inherited a country facing economic pressure from its largest trading partner and responded by flying to its second-largest one. Whether that qualifies as strategic diversification or dangerous dealmaking depends largely on which side of the border you’re standing on.
