Carney Goes to China: A Pragmatic Case for Canada’s China Trade Reset

The Prime Minister gave an important speech this morning that is well worth the read.

He also recently landed a deal to reset trade relations with China. It’s a practical response to the fact we can’t rely on the US as we once did, and it’s an immediate win for Canadian farmers and fishers.

Yes, there are reasons for caution. But as I explain below, critics like Doug Ford entirely miss the mark.

Canada can’t rely on the US, a country that is trampling on its own democracy at home, and abusing other democracies abroad.

So Carney goes to China, the world’s second largest economy and already Canada’s second largest trading partner in spite of a series of trade disputes. And he resets trade relations in a clear-eyed way. “We take the world as it is - not as we wish it to be.”

To put it simply, he largely resolves an outstanding dispute from the summer of 2024. Trudeau had imposed 100% tariffs on Chinese EVs in lockstep with Biden. China retaliated.

The world has certainly changed since. It now makes no sense at all to march in lockstep with the US at the expense of Canadian farmers and fishers, if it ever did.

Yes, of course there are reasons for caution. Human rights. Authoritarianism. And there are risks considering China’s recent history of weaponizing trade against us. But it’s also true that as we work to double Canada’s non-US exports, China is a piece of that puzzle.

Many Conservative premiers embraced the deal. “Welcome News”. (Newfoundland). “Pleased to see the reduction of tariffs.” (Smith) “A positive day.” (Moe)

But Ford and Poilievre finally found common ground in uneducated bluster. Poilievre tells us the agreement will jeopardize our security and auto jobs. Ford called it a “totally totally unacceptable” “terrible terrible miscalculated decision” and even talked about spy cars.

So let’s actually look at the deal:

China significantly drops its retaliatory tariffs on billions of dollars of agricultural products from Canada, canola seed, lobsters, crabs, peas. Yes, it’s tentative. Yes, the drop from 84% to 15% on canola leaves some room to improve. Yes, pork should be part of the deal too. There’s obviously more work to do, but it can’t be overstated how welcome this is for working farmers and fishers today.

In return, Canada gives up little. China is the world’s largest producer of EVs. We don’t have EV auto manufacturers here to protect.

Canada moves off the 100% EV tariff imposed in the summer of 2024. In its place will be a quota of 49,000 Chinese-made EVs at a much-reduced tariff rate of 6.1%. That quota grows slowly over 5 years.

It’ll mean cheaper prices for Canadian consumers, and it’s an opportunity for potential new investment in Canada’s auto industry.

Ford called it “a flood” of Chinese EVs, except that the quota corresponds to volumes in the 2023 year and represents less than 3% of the Canadian market for new vehicles.

Ford tells us “it’s going to be a big, big problem” for the existing auto manufacturers. Except that half of the quota is reserved for affordable EVs with an import price of $35,000, a car that doesn’t exist in Canada today. Consider that Europe has over 20 EV models selling for less than $40,000 Canadian. Canada has one, barely. And EV adoption is booming everywhere except in North America.

More broadly, the numbers don’t lie: the modest number of EVs Canadians currently buy just aren’t made here in Canada. Hopefully that changes, and that brings us back to the deal.

As American auto manufacturers abandon their Canadian promises, the agreement explicitly emphasizes an expectation that we’ll see Chinese investment through joint ventures led by Canadian companies to create new auto manufacturing careers for Canadian workers.

And it’s all subject to review in three years to gauge progress.

The PM rightly articulated it as “an opportunity for Ontario…for Ontario works…for Canada, done in a controlled way, with a modest start” :

And spy cars? I can’t believe I’m going to quote Danielle Smith, but she’s right: “Canadian security authorities will take any measures necessary to ensure all vehicles and other products sold into Canada post no threat to our nation’s privacy laws or national security interests”

There is the risk, of course, that we’ll piss off the Americans. Ford raised this too, forgetting about his own ad, I guess.

But Trump, for his part, called the deal a “good thing” and said “if you can get a deal with China, you should do that.”

It is true, of course, that not everyone south of the border felt the same way.

Nikki Haley, former US ambassador to the UN, wrote: “Canada cozying up to China to welcome more investment puts all of North America at serious risk.”

I’d phrase it a little differently though: Canada’s effort to reset relations in a modest way with China is a direct and reasonable response to the vicious incompetence of the United States that threatens us all.