The Trade Minefield of Carney’s China Visit

By Fen Osler Hampson

January 11, 2026

Prime Minister Mark Carney heads to Beijing this week with the goal of easing Sino-Canadian tensions and boosting trade. But he is also walking into a political minefield—one laid not just by the Chinese but also Washington.

The biggest minefield right now is the EV-Canola trade war.

China slapped punitive tariffs on Canada’s lucrative canola exports last year in retaliation for Canada’s 100% tariffs on electric vehicles (EVs), which Ottawa had introduced the year before under the Trudeau government. There can be no question that China’s motivation was less about securing access to Canada’s relatively small EV market than trying to drive a wedge between Ottawa and Washington as Donald Trump re-took the reins of power.

There is room for a deal in which Canada gradually reduces tariffs on Chinese EVs while China dismantles its canola (and pork and seafood products) barriers perhaps through a phased tariff‑rate quota arrangement.

But any bargain must navigate Ontario’s fears about its auto plants, which is precisely why the EV tariff was imposed, and intense pressure from the prairie provinces to reopen the Chinese market to their agricultural products.

Ontario Premier Doug Ford has made it clear that he does not want any agreement that imperils Canada’s automotive manufacturers. Carney will have to tread carefully.

There are other minefields for Carney to navigate.

This year’s CUSMA review gives Washington major leverage over Canada’s trade choices. Trump has made no secret of the fact that he views Canada and Mexico as back doors for Chinese goods entering the US market on everything from fentanyl to steel to truck parts to kitchen cabinets.

New U.S. measures include a threatened 40% tariff on “transshipped” goods that move through third countries, a measure explicitly aimed at shutting down routes that divert Chinese products into the U.S. market. Canada and Mexico should take careful note.

In the CUSMA talks, Canada can expect U.S. demands for a de facto common external tariff against China and other non‑North American suppliers, along with tougher rules of origin in autos and manufacturing that squeeze out non‑CUSMA content.

The more Canada is perceived as a U.S. vassal in trade policy, the harder it becomes to maintain and negotiate meaningful trade agreements with anyone else.

Such measures risk turning CUSMA from a free‑trade arrangement into “Fortress North America” that is a customs union in all but name, effectively locking Canada into Trump’s protectionist industrial policy vise.

A U.S.-driven common tariff wall would also collide with Canada’s obligations under CETA and the CPTPP, which are built around most‑favoured‑nation (MFN) commitments and relatively liberal rules of origin. If Ottawa is forced to mirror U.S. Section 301 tariffs and content rules, European and Asia‑Pacific partners will see their duty‑free or low‑duty access to the Canadian market eliminated.

That, in turn, would undercut the trade diversification strategy with Europe and Asia that Canada has spent more than a decade constructing while confirming the fear of our trading partners that Ottawa will always default to U.S. preferences when forced to choose sides.

The more Canada is perceived as a U.S. vassal in trade policy, the harder it becomes to maintain and negotiate meaningful trade agreements with anyone else.

Carney will be tempted to seek agreement with the Chinese to sell more of Canada’s bountiful natural resources and agricultural goods. Chinese demand for our oil, LNG, lumber and grains is insatiable, given the size of its huge and growing market which is, by far, the biggest in Asia.

Yet, relying on one dominant buyer creates a monopsony problem whether it is China for canola or the U.S. for oil and autos. A single customer can weaponize market access and price. If Canada substitutes dependence on the United States for dependence on China, it will gain nothing. As Carney himself has said, we must avoid putting all our eggs in one basket.

True diversification means not simply swapping one monopsony buyer for another but deliberately spreading risk across markets and key export sectors, even at the cost of some short‑term export volume. That requires a clear political narrative at home, where voters are cooling on Carney’s minority government and premiers are already split between crops and cars.

On investment, Carney should distinguish clearly between those sectors where Chinese capital is a security risk and those where it is not. Critical minerals, advanced manufacturing, and IP‑intensive industries demand strict oversight or exclusion, but Chinese participation in low‑risk infrastructure such as bridge‑building or other non‑strategic sectors is a different matter.

Yet every investment decision and every concession to the Chinese will now be read in Washington as a signal as to whose side Canada is on.

Carney’s diplomatic challenge when he sits down with Premier Xi Jinping and his officials is not simply to haggle over tariffs, but to show that he can walk through these minefields and defend Canada’s interests with both Beijing and Washington.

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.