January 16, 2026
Until recently, Canadian trade policy followed a simple rule: stay in lockstep with Washington and don’t go out of your way to upset Donald Trump. But this week in Beijing, Prime Minister Mark Carney hit the “Code Red” button.
By opening Canada’s door to Chinese EVs in exchange for lower Chinese tariffs on canola, peas and seafood, Carney has signalled that there is no more pussyfooting around Washington. A new age of “strategic realism” has arrived.
Make no mistake. This deal is a lifeline for Canadian farmers and seafood producers. After almost a year of being locked out of their second-largest market, the Prairies and the Atlantic coast are back in business.
The Chinese agreed to lower duties on canola seed from 75.8% to 15% while eliminating the 100% duty on canola meal, peas and seafood. This will effectively restore billions in exports and protect the livelihoods of some 40,000 grain farmers and thousands of fishers who were unwittingly caught in the trade war. The deal provides much-needed market stability that producers have been demanding since the dispute began.
Consumers will also benefit from the deal. For years, EVs have been a luxury item for Canadians who want to drive green and clean. The agreement will inject much-needed competition into a stagnant market, particularly after Ottawa and Quebec eliminated subsidies for EV purchases.
By allowing up to 49,000 Chinese EVs to be sold in Canada at a low 6.1% tariff rate, the government is providing just enough competition for North American and other EV manufacturers to force prices down, making electric vehicles more accessible to the middle class, not just the wealthy.
Ontario is the loser in this deal in a double sense. Premier Doug Ford has pointed out that giving the Chinese a foothold in autos will allow it to capture market share before Ontario’s EV battery and assembly plants (Stellantis and VW) are fully operational. He is also worried — with good reason — about how Trump might retaliate.
The most fraught part of the deal is the Trump factor. Carney has now put real daylight between Canada’s trade policies and the U.S. administration’s protectionist policies.
But he is also taking a huge risk with a mercurial and vindictive president who may well see Carney’s China pivot as a betrayal and a threat to North American security, particularly since Canada also signed other agreements with China on energy and investment.
The most fraught part of the deal is the Trump factor. Carney has now put real daylight between Canada’s trade policies and the U.S. administration’s protectionist policies.
The most immediate threat is the expansion of Executive Order 14325, which allows the U.S. to impose a 40% duty on goods from countries it suspects of “transshipping” Chinese content. In a “guilt-by-association” play, Trump may argue that by allowing 49,000 Chinese EVs into our market, Canada is clearing the path for all kinds of Chinese components to enter the North American auto supply chain.
That could mean that even if a car is built in Ontario, if it uses a battery or sensors from a Chinese firm that benefits from the new deal, it could be hit with the 40% surcharge at the border.
Trump might also decide to launch a Section 301 of the Trade Act of 1974 investigation into Canada under the same pretext it used these provisions to launch the trade war with China.
This would give the U.S. Trade Representative (USTR) the authority to investigate whether Canada’s “preferential quota” for Chinese EVs constitutes an “unjustifiable or discriminatory” act that burdens U.S. commerce. If this were the case, Trump would have the legal authority to impose reciprocal tariffs on Canadian energy or anything else that caught his fancy, without having to formally withdraw from CUSMA.
Carney likely believes that the China deal is a valuable bargaining chip in the upcoming CUSMA renewal negotiations. He clearly wants to send a strong signal that Canada has other options other than the U.S. market.
If push comes to shove, he could offer the U.S. preferred access to our critical minerals, especially lithium, nickel and cobalt, in exchange for keeping the U.S. border open for trade in autos and auto parts.
He also has the option, if U.S. pressure becomes unbearable, to offer to “snap back” quota and tariff provisions in the deal with China, in return for the U.S. offering us unfettered market access for steel, aluminum, and autos. However, such a move would burn his new bridge to China for good.
Nevertheless, it never hurts to show a bully you aren’t going to play his game and to demonstrate you have other options and are negotiating from a position of strength, not out of desperation.
The new agreement with China is a calculated risk, but it also clearly signals that Canada will no longer be a patsy in Trump’s trade wars.
Policy Contributing Writer Fen Osler Hampson, FRSC, is the Chancellor’s Professor and Professor of International Affairs at Carleton University, and President of the World Refugee & Migration Council. He is co-chair of the Expert Group on Canada-US Relations.