Canada and China Forge New Trade Alliance Amid Changing Dynamics

In a notable development in international trade, Canada and China have entered into a comprehensive energy and trade cooperation agreement. This deal was announced during the four-day visit of Canadian Prime Minister Mark Carney to Beijing, marking the first visit by a Canadian leader since 2017, shortly after the imposition of tariffs by former U.S. President Donald Trump. The agreement signifies a strategic pivot for Canada as it seeks to diversify its trade relationships in response to ongoing tensions with the United States.

At the core of this agreement is a new energy cooperation framework aimed at enhancing commercial and policy engagement between Ottawa and Beijing. Both countries committed to holding regular ministerial-level energy dialogues every 12 to 18 months. These discussions will focus on cooperation in traditional energy sectors as well as low-carbon technologies, including renewable energy, oil and gas trade, and climate innovation. This structured dialogue is expected to create stable platforms for collaboration in an increasingly volatile global energy market.

Broadening Trade Relations

During his visit, Prime Minister Carney and Chinese leaders also signed multiple memorandums of understanding (MOUs) that encompass a wide range of sectors, from forestry and food safety to cultural exchange and crime prevention. Carney emphasized that energy cooperation serves as a “pillar” of this renewed strategic partnership, highlighting the potential for job creation and investment opportunities on both sides of the Pacific.

Chinese President Xi Jinping remarked that relations between Canada and China have significantly improved following the APEC summit held in South Korea in October. At this summit, Xi personally invited Carney to China, a notable shift after several years of strained relations under Carney’s predecessor, Justin Trudeau. The recent agreement indicates a thawing of hostilities, as Canada seeks to reduce its economic dependence on the United States, particularly after Trump’s tariffs and controversial comments regarding Canadian sovereignty.

A key economic aspect of Carney’s visit involved a new trade and tariff framework between Canada and China. Canada announced significant reductions in its tariff regime, notably lowering the duty on Chinese electric vehicles (EVs) from an effective rate of approximately 100% to a most-favoured-nation (MFN) rate of 6.1% for up to 49,000 vehicles annually, with plans to increase this quota to about 70,000 vehicles over five years.

In exchange, China has significantly reduced tariffs on Canadian agricultural exports, including a decrease of duties on canola seed from roughly 84% to about 15%, effective March 1, 2026. Additional tariff reductions apply to other agricultural products such as canola meal, lobsters, peas, and crabs. The Canadian government’s official backgrounder on the preliminary trade agreement highlights that these tariff alterations and expanded market access are projected to “significantly improve market access” for Canadian agricultural goods, valued in the billions annually.

As Canada navigates a complex global trade environment, this new agreement with China not only aims to bolster economic ties but also reflects a broader strategy to diversify its export markets. The evolving dynamics between Canada and China may set a precedent for future cooperation, offering both nations new avenues for trade and investment.