Canadian PM Carney’s China trip signals shift in trade strategy: Analyst

Key Concepts

• Bilateral Relationship: The complex diplomatic and economic ties between Canada and China.
• Trade Diversification: Canada’s strategy to reduce economic reliance on the United States by expanding trade with other nations, particularly in the Indo-Pacific region.
• Tariffs & Trade Disputes: Specifically, the 100% tariffs imposed by Canada on Chinese EVs and retaliatory tariffs on Canadian canola.
• Strategic Dependence: The risk of becoming overly reliant on China, particularly in critical sectors like energy and minerals.
• Indo-Pacific Strategy: Canada’s focus on strengthening economic and diplomatic ties within the Indo-Pacific region.
• Canola/Rapeseed Trade: The significant role of canola exports to China and the impact of Chinese tariffs on Canadian farmers.
• Energy Leverage: Canada’s potential to leverage its energy resources (conventional oil) in negotiations with China, particularly given disruptions in Venezuelan oil supply.
• Intellectual Property Concerns: Risks associated with joint ventures between Canadian and Chinese clean energy companies, specifically regarding IP theft.

Canada-China Relations: Carney’s State Visit & Trade Dynamics

This report details Canadian Prime Minister Mark Carney’s four-day state visit to China, the first by a Canadian leader in eight years, and the context surrounding this trip. The visit aims to “recalibrate” the Canada-China relationship, described as “complex” by Foreign Minister Nita Nan, and to ensure Canada’s security and economic interests are represented during negotiations. Nan emphasized the importance of engaging with China, a major global economy and Canada’s second-largest trading partner.

Declining Trade & Existing Disputes

Recent data reveals a shift in the trade balance, with Chinese imports from Canada falling by 10.4% in 2025 – the first decrease since 2020. This decline is largely attributed to Chinese tariffs imposed on Canadian canola (referred to as rapeseed in some countries) in retaliation for Canada’s 100% tariffs on Chinese electric vehicles (EVs) enacted by former Prime Minister Justin Trudeau two years prior. Approximately 67% of Canada’s canola exports historically went to China. While some canola is now being rerouted through the UAE and then resold to China, the tariffs continue to negatively impact Canadian farmers.

Strategic Context & Trade Diversification

Margaret McQuade Johnston, a Senior Fellow at the University of Ottawa, highlighted the strategic importance of this visit. She explained that Prime Minister Carney is actively pursuing trade diversification away from the United States, citing recent US tariffs on Canadian autos, steel, and aluminum, and upcoming intense trade negotiations with the US. The Indo-Pacific region is a key focus of this diversification strategy, with this trip representing Carney’s third visit to the region in the past year.

Johnston stated, “Prime Minister Carney has seen that we need to diversify to other countries and so he’s been on the road really for the last year…the Indo-Pacific is a really big part of that.”

Leveraging Energy Resources & Infrastructure

The potential for Canada to become a source of energy for China, particularly in light of the US blockade of Venezuelan oil, was discussed. Johnston suggested Canada could leverage this position by offering increased investment in Canadian conventional energy infrastructure as a bargaining chip to persuade China to lift its canola tariffs. She noted significant infrastructure projects underway in Western Canada, which could benefit Chinese investment.

Concerns Regarding Clean Energy & Intellectual Property

While clean energy was mentioned as a topic of discussion, Johnston cautioned against over-reliance on this sector. She expressed concerns about past experiences with joint ventures between Canadian and Chinese clean energy companies, where Chinese partners often gained majority ownership and subsequently acquired Canadian intellectual property. She emphasized the need to protect Canadian small and medium-sized enterprises in this area.

US-Canada-China Dynamics & Potential Risks

The visit’s timing is sensitive due to upcoming trade negotiations with the US. Johnston warned that China would likely attempt to create a wedge between Canada and the US, and that the US might view Canada’s outreach to Beijing with suspicion. She specifically cautioned against Canada lowering tariffs on Chinese EVs or allowing their manufacture within Canada, as this could jeopardize the integrated North American automotive sector.

Johnston noted, “This is a real sensitivity because our trade negotiations are coming up in the coming months…we can expect that China will be pleased to put a wedge between Canada and the US.”

Long-Term Goals & Economic Feasibility

Canada’s goal of doubling its non-US trade over a ten-year period was discussed. While economically feasible, Johnston cautioned against becoming strategically dependent on Chinese state-owned enterprises, particularly in critical sectors like energy and minerals. She emphasized that the immediate focus should be on resolving the canola issue and gradually rebuilding the overall relationship, which has been “frozen” for the past eight years from the Chinese perspective.

Conclusion

Prime Minister Carney’s visit to China represents a significant attempt to reset a complex relationship and diversify Canada’s trade portfolio. While opportunities exist, particularly in the energy sector, careful consideration must be given to potential risks, including trade tensions with the US and the protection of Canadian intellectual property. The success of this visit will hinge on Canada’s ability to navigate these challenges and secure mutually beneficial outcomes, particularly regarding the lifting of tariffs on canola and the establishment of a more stable and predictable trade environment.