Canada Won’t Seek New China Trade Deal
Canada’s premier, Mark Carney, stated that the nation holds “no intention” of seeking a formal free-trade accord (FTA) with China, a move intended to cool the expanding trade confrontation with the United States. His comment came after President Donald Trump issued weekend warnings, saying he would levy a 100% tariff on every Canadian product should Ottawa intensify economic connections with Beijing. Addressing journalists in Ottawa, Carney noted that the current dialogue with China is limited in purpose, aimed solely at “rectify issues” from the previous two years rather than create a full trade treaty overall soon.
Terms of the Agreement
The tension stems from a trade arrangement concluded on January 16, 2026, during Carney’s visit to Beijing. The deal was designed to ease a cycle of retaliatory measures that began in 2024. Under the accord, Canada will allow 49,000 Chinese electric vehicles annually at a significantly reduced tariff of 6.1% (down from 100%). Lowering the barrier for entry-level EVs is seen as essential for meeting national emissions targets, as high costs remain the primary hurdle for Canadian EV adoption.
China’s concessions include slashing tariffs on Canadian canola seed oil from 85% to 15%, along with waiving anti-discrimination duties on exports like lobster, beef, and hay until the end of 2026. Additionally, Beijing has pledged to invest in Canada’s automotive industry over the next three years. Carney described the pact as a step toward stability, countering the instability caused by shifting trade policies from the United States.
When asked whether China has proven to be a more dependable trade partner than the U.S., Carney noted, ‘Our relationship with China has become more consistent lately, and that’s starting to show real outcomes.’
USMCA Limits Canada’s Options
The USMCA’s Article 32.10, nicknamed the ‘China Clause,’ grants each member country—a veto over the others’ ability to negotiate trade deals with nations deemed ‘non-market economies.’ If Canada, Mexico, or the U.S. plans to engage in talks with such a country, they must inform their partners at least three months in advance. They must also share details about the proposed agreement’s goals and the full text of the deal for review before finalizing it.
Should one member proceed with a trade agreement involving a non-market economy, the other two can exit the USMCA with six months’ notice. The provision exists to block China from exploiting Canada or Mexico as indirect routes to access the U.S. market without tariffs. It enforces a united North American stance against economic systems that rely on state-backed subsidies over market competition.
With the USMCA undergoing its scheduled review this summer, the agreement’s future holds major implications for Canada’s economic strategy. For now, Carney is balancing two priorities: expanding trade ties beyond the U.S. to reduce risk while avoiding actions that could provoke retaliation from America’s dominant market.
China’s Economic Outlook for 2026
Last week, China’s National Bureau of Statistics reported that the world’s second-largest economy expanded by 4.5% year-on-year in the fourth quarter of 2025, marking the slowest quarterly pace in three years. Despite the cooling year-end performance, the Chinese economy grew by 5.0% for the full year, successfully hitting Beijing’s official target of “around 5%.” This achievement was largely driven by a record-breaking export engine that offset a persistent slump in the domestic market.
The 2025 data highlights a growing “K-shaped” divergence within the Chinese economy. High-tech manufacturing and exports reached historic highs, while domestic demand and real estate continued to drag on the national average. Chinese manufacturers defied significant global trade tensions by aggressively diversifying into emerging markets in Asia, Africa, and Latin America. China reported a record trade surplus of $1.2 trillion in 2025, a 20% increase from the previous year.
China has now entered its new 15th Five-Year Plan period with a decisive shift toward a “moderately loose” monetary policy. Reeling from a multi-year property downturn and tepid domestic consumption, Beijing is doubling down on targeted stimulus measures to kickstart the year. The focus remains on balancing external trade stability with internal structural reforms.
