Canada and China have finalized a preliminary trade deal, reducing tariffs on key exports and easing travel restrictions. The US has threatened to impose 100% tariffs on Canadian imports if the agreement proceeds, citing concerns over Chinese goods entering the US market.
Immediate Action & Core Facts
China and Canada announced a new strategic partnership on January 16, including reduced tariffs on Canadian canola imports and visa-free travel for Canadians. In response, the US threatened 100% tariffs on Canadian goods if the deal is finalized, with Treasury Secretary Scott Bessent warning against "dumping" of Chinese goods through Canada.
Canadian Prime Minister Mark Carney clarified that the deal is not a free trade agreement but addresses recent trade disputes, including reciprocal tariffs on electric vehicles and agricultural products. He emphasized Canada has no plans to pursue broader free trade with China.
Deeper Dive & Context
China's Response to US Threats
China's foreign ministry spokesman Guo Jiakun stated the deal "does not target any third party" and urged cooperation over confrontation. He framed the agreement as a win-win partnership, rejecting US allegations of economic targeting.
US Concerns and Political Rhetoric
President Donald Trump and Treasury Secretary Bessent warned that Canada could become a "backdoor" for Chinese goods into the US. Trump also criticized China's influence on Canada, jokingly referencing Canadian ice hockey. The US has previously imposed tariffs on Canadian steel, aluminum, and electric vehicles.
Details of the Canada-China Deal
The agreement includes:
- Canola tariffs reduced from 84% to 15% by March 1.
- Visa-free travel for Canadian visitors to China.
- Limited EV imports: 49,000 Chinese EVs annually at 6.1% tariffs, rising to 70,000 over five years.
- Chinese investment in Canada's auto industry expected within three years.
Canada's Trade Commitments
Carney noted Canada's obligations under the USMCA (US-Mexico-Canada Agreement) to notify the US before pursuing trade deals with non-market economies. He stressed the deal with China is limited to resolving recent disputes, not expanding trade.
Broader Trade Tensions
In 2024, Canada mirrored US tariffs on Chinese EVs (100%) and steel/aluminum (25%). China retaliated with tariffs on Canadian canola, pork, and seafood. The new deal aims to ease these restrictions while maintaining trade safeguards.