Canada Makes Strategic Pivot Towards China with New Trade Deal

Sat Jan 17 2026 17:33:34 GMT+0200 (Eastern European Standard Time)

In a significant policy shift, Canada has reached a trade agreement with China, easing tariffs on electric vehicles while addressing agricultural trade. This decision reflects Canada's growing independence amid uncertainties in its relationship with the United States.

Canada's new trade agreement with China marks a notable realignment in its foreign policy, reducing tariffs on Chinese electric vehicles in exchange for lower tariffs on Canadian agricultural exports. Prime Minister Mark Carney's comments suggest a strategic shift, indicating that Canada is asserting its agency and adapting to changing global dynamics. The move has drawn mixed reactions domestically and abroad, signaling potential economic implications for both Canada and the US.

Prime Minister Mark Carney's new approach to Canada's foreign policy can perhaps be distilled in one line: We take the world as it is, not as we wish it to be.

That was his response when asked about the deal struck with China on Friday, despite concerns over its human rights record and nearly a year after he called China the biggest security threat facing Canada.

The deal will see Canada ease tariffs on Chinese electric vehicles that it imposed in tandem with the US in 2024. In exchange, China will lower retaliatory tariffs on key Canadian agricultural products.

Experts told the BBC the move represents a significant shift in Canada's policy on China, one that is shaped by ongoing uncertainty with the US, its largest trade partner.

The prime minister is saying, essentially, that Canada has agency too, and that it's not going to just sit and wait for the United States, said Eric Miller, a Washington DC based trade adviser and president of the Rideau Potomac Strategy Group.

Carney told reporters on Friday that the world has changed in recent years, and the progress made with China sets Canada up well for the new world order. Canada's relationship with China, he added, had become more predictable than its relationship with the US under the Trump administration.

In Canada, as daylight broke on Friday, reaction to the deal was swift. Some, like Saskatchewan Premier Scott Moe, hailed it as very good news. Farmers in Moe's province have been hard hit by China's retaliatory tariffs on Canadian canola oil, and the deal, he said, would bring much-needed relief.

But Ontario Premier Doug Ford was sharply critical of the deal, stating it would hurt the Canadian economy. He emphasized that removing EV tariffs on China could lead to job losses without guarantees for investment in Canada.

With the lower EV tariffs, approximately 10% of Canada's electric vehicle sales are now anticipated to go to Chinese automakers, posing competitive challenges to US-based companies like Tesla.

The reaction from the White House has been mixed, with US Trade Representative Jamieson Greer labeling the deal problematic while President Trump considered it a good thing.

The deal reduces Canada's tariffs on imported Chinese EVs from 100% to 6.1% for the first 49,000 vehicles annually, with projections to increase this quota in the coming years. In return, China will cut tariffs on Canadian agricultural products significantly, enhancing bilateral trade.

With fresh dialogues on trade following this agreement, analysts assert that Canada's recalibration of relations with China could reshape its economic landscape amid evolving geopolitical dynamics.