A diplomatic thaw between Ottawa and Beijing has suddenly become a geopolitical test for North American trade. After a high‑profile visit to China — described in Chinese coverage as the first Canadian prime ministerial trip to Beijing in eight years — Ottawa announced a limited, pragmatic deal: steep reductions in tariffs on Chinese electric vehicles in return for restored Chinese access for Canadian canola. The move was presented in Beijing as a “preliminary but historic” step to reopen trade channels long strained by political fallout.
The announcement prompted an immediate and uncompromising reaction from Washington. President Donald Trump used his Truth Social platform to warn that if Canada formalises trade concessions with China, the United States would retaliate with a 100% tariff on all Canadian imports. Trump framed the deal as a penetration of America’s “backyard” and a threat to North American industrial competitiveness, arguing that Chinese EVs entering Canada could undercut U.S. automakers and even find routes into the U.S. market.
Ottawa’s agreement with Beijing, as reported in the source piece, would slash Canada’s tariff on Chinese passenger electric vehicles from 100% to about 6.1%, permit roughly 49,000 Chinese EVs to enter the Canadian market initially and rise to 70,000 within five years, and secure a commitment from China to invest in Canada’s auto sector. In return China would reduce canola tariffs from roughly 84% to about 15%, restoring a crucial outlet for one of Canada’s largest agricultural exports.
The economic stakes explain why the row is so explosive. Canada’s export dependence on the United States remains overwhelming: in 2024 Canadian exports to the U.S. were about $438 billion, compared with roughly $22 billion by Canadian statistics to China (Chinese import figures for Canada are higher). Even a partial rupture of market access to the U.S. would dwarf any near‑term gains from deeper trade ties with China. That asymmetric exposure gives Washington substantial leverage — and explains why a punitive tariff threat, however blunt, lands as a credible sword of Damocles in Ottawa.
Beyond balance‑sheet arithmetic this dispute highlights deeper strategic shifts. China is already the world’s dominant EV manufacturer and sees North American market access as a linchpin for scaling production and subsidised exports. For Canada, the deal offers a pragmatic way to repair damaged ties with its second‑largest trading partner and to diversify export markets. For the United States, the prospect of subsidised Chinese industrial goods gaining footholds in North America is both an economic and political red line, especially under an administration that views trade policy as an instrument of geopolitical competition.
Domestically, Ottawa finds itself squeezed. The Canadian government has urged citizens to “buy local” and pushed a two‑track response: shore up internal trade resilience while courting Asian and European markets. Business groups have urged calm and clearer diplomacy with Washington, warning that companies need predictability not geopolitical brinkmanship. Farmers and parts manufacturers, who depend on both Chinese and American markets in different ways, face a fraught calculus about the immediate benefits of restored canola exports versus the catastrophic risk of U.S. tariffs.
This episode will force quick choices with long consequences. Ottawa can attempt to thread a narrow needle — codifying targeted tariff reductions with bespoke safeguards to prevent trans‑shipment into the U.S. and courting Washington with reassurances and concessions elsewhere. Or Canada may opt for clearer market diversification, accepting short‑term pain to reduce long‑term strategic dependence on the United States. Either path will reshape North American trade politics and will be watched closely by allies and investors around the world.