Dr. Michael Batu is an associate professor of economics at the University of the Fraser Valley.
During an official visit to Beijing, China from Jan. 13-17, Prime Minister Mark Carney unveiled a new strategic partnership that made significant progress in warming Canadian-Chinese trade relations. In an email conversation with The Cascade, Batu shed some light on this new trade agreement and what it could mean for Canada.
“In the short run, the United States is unlikely to view this favourably. The U.S. sees China as its primary strategic rival and does not want a neighbouring country in this hemisphere becoming too closely aligned with Beijing.”
The deal between Canada and China included promises to cooperate on energy and agriculture, with a focus on climate competitiveness and clean power. Furthermore, China and Canada expressed joint commitments to transnational security, multilateralism, and cultural exchange. As a tangible result of this deal, a maximum of 49,000 Chinese Electric Vehicles (EVs) will be permitted into the Canadian market with a low 6.1 per cent tariff rate, which will increase in the next five years to 70,000 vehicles.
In a win for Canadian agriculture, China will also lower its tariffs on canola seed exports to approximately 15 per cent in March, and lifted an import ban on Canadian beef that had been in place since 2021.
While the agreement is not considered a free trade deal, it does mark one of the most pivotal economic resets between the two countries in nearly a decade. Carney commented on the merit of this new deal.
“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 that builds on the best of our past, reflects the world as it is today, and benefits the people of both of our nations.”
Batu expressed both concern and cautious optimism at the deal. With the United States presenting an ever more unruly “ally,” the need to diversify Canada’s trade partners is an economic priority. However, this particular deal may have some consequences for the country.
“In the short term, this strategy could actually be destabilizing [for Canada]. The U.S. remains Canada’s most important trading partner, and President Trump has shown a willingness to use tariffs aggressively and, at times, personally. I would not be surprised to see tariffs return at higher levels than before.”
Batu’s warning highlights the fragility of Canada’s position between two competing economic powers, where diversification may provoke retaliation before it delivers long-term stability. By diversifying who Canada does business with, it could reduce its reliance on the United States and benefit Canadians, as well as provide access to cheaper EVs.
“Affordability is a major potential benefit. Some Chinese-made EVs sell for under $8,000, which could dramatically improve access to transportation, especially for younger Canadians. There are also potential job gains in agriculture and energy, driven by expanded export opportunities.”
When asked about if the deal had any future, Dr. Batu explained that it really was based on geopolitics.
“At the moment, China appears attractive to Canada, and China also has incentives to maintain friendly relations with a country that borders the United States. Much of this is driven by the current political climate south of the border.”
However, this could change quickly if Canada is drawn back to the United States, which would again distance China.
“The durability of the deal will also depend on China’s behavior. China tends to prefer bilateral arrangements and expects political alignment. If Canada is perceived as simply following U.S. policies that are adversarial to China, the relationship may not last.”
The deal has already drawn the ire of United States President Donald Trump, who has threatened Canada with retaliatory 100 per cent tariffs if it makes a trade agreement with China. Carney responded by assuaging the belief that this would lead to a free trade deal with China, and emphasized that the deal constitutes an effort to smooth relations.
At first, Trump was unconcerned and agreed that the deal made sense. It was after Carney’s speech at the Davos World Economic Forum, that Trump changed his tune, threatening tariffs and labelling Carney as a “governor.” He also posted about Carney and his deal with China on Truth Social.
“If Governor Carney thinks he is going to make Canada a ‘Drop Off Port’ for China to send goods and products into the United States, he is sorely mistaken.”
Carney’s strategy with China may test Canada’s economic autonomy, and reveal whether or not the country can diversify and break away from its biggest trading partner, the United States.
Interview has been edited for length and clarity.
