China might be Canada’s biggest opportunity to diversify its trade away from the U.S.
The thaw in Canada-China relations that Ottawa is promoting recognizes that China is already Canada’s second-largest trading partner.
China’s goods imports from Canada have more than doubled in the past five years, to about $65 billion in 2024.
China buys Canadian oil, natural gas, coal, wheat, wood products, canola, seafood, beef, copper, iron ore and other essentials, many related to China’s priorities of food and energy security.
Prime Minister Mark Carney plans to meet Chinese President Xi Jinping in coming weeks. Carney has cited opportunities for greater collaboration with China in energy, climate change, commodities and basic manufacturing.
“There is a very broad range of commercial relationships that already exist and a much larger range of opportunities for both countries,” Carney said last month after meeting with Chinese Premier Li Qiang.
More recently, Anita Anand, Canada’s foreign affairs minister, was in China last week to meet with government officials on restoring relations that have been strained for several years.
“We will co-operate with China where we can, but challenge them where we must,” Anand said.
Challenges include China’s human rights abuses and Chinese dumping of below-cost steel in the Canadian market.
The potentially historic rapprochement takes place when both Canada and China seek to partially disengage from the U.S. economy.
Canada wants to boost its exports to China and extend its credibility as a reliable trading partner across the Indo-Pacific region, home to some of the world’s fastest-growing economies.
And China is determined to reduce its energy purchases from the U.S., Russia and the Middle East.
Canada’s growing export capacity in crude oil and liquified natural gas (LNG) makes it an attractive alternative supplier.
“As U.S.-China trade tensions deepen and their economies decouple, Canada has an opportunity to fill gaps left by the U.S.,” the Conference Board of Canada said in a report last spring on Canada-China relations.
The most immediate challenge is to end the trade conflict between Canada and China, which began last year when Ottawa imposed steep tariffs on imported Chinese electric vehicles (EVs), steel and aluminum.
China retaliated this year with high tariffs on imported Canadian canola, pork and seafood, which is costing Prairie farmers and Atlantic and Pacific fishers more than a billion of dollars in lost revenues on an annual basis.
Canada’s trade war with China has fractured national unity, with protection of Ontario’s auto sector from cheap Chinese EVs seen to be at the expense of Prairie farmers and coastal fishers.
As this space has argued, Canada’s trade war with China doesn’t make sense. It was launched in lockstep with a Biden administration since replaced by a Trump administration that is attacking Canada’s economy.
China has pledged to lift its tariffs on Canadian imports if Canada rescinds its tariffs.
Beijing has also been suggesting for months that it wants to resume the free-trade talks it held with Canada in 2017 that were sidetracked by U.S. trade assaults on Canada and China by the first Trump administration.
Carney has met Xi Jinping several times, most recently last year to discuss global finance when Carney was chair of media firm Bloomberg LP’s board of directors.
The Carney government has had the Trudeau-era tariffs on Chinese goods under “review” for several months.
Meanwhile, the trade dispute hasn’t diminished China’s interest in Canadian energy products.
China has been among the first buyers of Alberta oil supplied by the new Trans Mountain pipeline (TMX) that went onstream last year, and of B.C. natural gas from LNG Canada’s plant on the West Coast, which began operations this year.
China presents Canada with its biggest moral challenge in trade, given Beijing’s repression of Uyghur Muslims, its continued crackdown on Tibet and on dissidents in Hong Kong, and its attempts to isolate and intimidate Taiwan.
Earlier this year, Carney seemed to rule out strengthening Canadian ties with China because of its lack of shared values with Canada.
But a major policy shift is underway as Canada strives to match a traditionally Eurocentric foreign policy with a more robust commercial presence across Indo-Pacific economies.
China’s $24.3-trillion economy accounts for about 20 per cent of the world’s middle class. Tim Hortons, Lululemon and Canada Goose are among the Canadian brands that have succeeded in China’s burgeoning consumer economy.
And in China’s agricultural, energy and industrial sectors, Canadian firms can make greater inroads in exporting advanced farm equipment, engineering services and environmental technology.
Disputes between Canada and China in the past decade have held back the potential of both countries for too long.
Anand’s formula of co-operation and continued pushback on Chinese human rights abuses will be difficult to execute. But in this era of U.S. hostility that many experts believe will outlast Donald Trump, it’s a challenge we must embrace.
