Canada Gains From China, U.S. Watches Closely

(MENAFN- Trend News Agency) BAKU, Azerbaijan, January 28. As the global economy begins to recover from a series of trade disruptions, a new trade initiative between Canada and China has drawn significant attention from policymakers and analysts across both sides of the Pacific. On January 16, 2026, Ottawa and Beijing signed an agreement that, while seemingly pragmatic and narrowly focused, has already sparked speculation regarding its potential ramifications for U.S. economic interests and foreign policy.

At the heart of the deal lies a straightforward arrangement: Canada will reduce tariffs on Chinese electric vehicles, which were initially imposed in 2024 in coordination with the United States, while China will lower duties on key Canadian agricultural exports. Specifically, Canada will permit the annual import of up to 49,000 Chinese EVs at a reduced tariff rate of 6.1%, down from the previous 100%. This quota is set to gradually rise to 70,000 vehicles over the next five years. Projections suggest that within this period, more than half of the Chinese EVs entering under the preferential quota will be priced below $35,000, thus expanding consumer options and providing a significant boost to Canada's domestic market.

China, for its part, will lower tariffs on Canadian canola from 84% to roughly 15% starting March 1, 2026, and will eliminate duties on lobster, crab, flour, and peas. Canadian authorities estimate that the move will unlock roughly $3 billion in stalled export orders.

Canadian Prime Minister Mark Carney described the agreement as a pragmatic step aimed at diversifying trade and reducing reliance on what he called increasingly volatile relations with the United States. For farmers and fishers who have faced unpredictable trade barriers in recent years, the tariff cuts promise a measure of long-sought stability.

The move, however, provoked an immediate and forceful response from Washington. On January 24, President Donald Trump took to Truth Social to issue a stark warning that, should Canada become a conduit for Chinese goods, the U.S. might impose a 100% tariff on all Canadian exports. U.S. officials have emphasized that any trade concessions granted to China could be perceived as an attempt to bypass existing tariff frameworks.

The following day, the Canadian government swiftly refuted reports suggesting the imminent preparation of a comprehensive free trade agreement with China. Carney clarified that the recent measures were exclusively focused on addressing specific concerns within agriculture and seafood, and did not represent the foundation of a broader trade partnership. Ottawa further stressed that the inclusion of electric vehicle (EV) quotas rendered the deal highly targeted, asserting that it did not pose a direct threat to U.S. interests.

Beijing, meanwhile, pushed back against claims that the agreement carries an anti-American edge. China's Foreign Ministry said the cooperation is based on mutual benefit and openness and is intended to support stability and development in both countries. Recent trade data adds nuance to that argument: In 2025, China–Canada trade totaled $89.6 billion. Chinese exports to Canada rose to $47.9 billion, up 3.2%, while imports from Canada fell to $41.7 billion, down 10.4%. Overall bilateral trade declined 3.6% from 2024, underscoring the fragility of traditional trade flows and the pressure to seek new opportunities.

Against that backdrop, Canada is clearly attempting a delicate balancing act between economic pragmatism and political risk. Limited concessions on Chinese EVs and agricultural products leave room for maneuver, allowing all sides to avoid a sweeping agreement that could provoke U.S. sanctions. At the same time, deeper engagement with China could become a longer-term pressure point, particularly as U.S.– China trade shrank by 18.7% in 2025 to $559.7 billion. Chinese exports to the U.S. fell 20% year over year, while imports from the U.S. dropped 14.6%, narrowing China's trade surplus to $280.3 billion.

This new phase in Canada-China relations manifests a dual character: a pragmatic attempt to stabilize trade while safeguarding national interests, coupled with a potential point of friction with the U.S., where any divergence in tariff policy is viewed through a lens of strategic risk. The contours of the situation are sharply delineated. Canada maintains that its measures are both limited and targeted, while China underscores their mutually advantageous nature. The U.S., for its part, signals its readiness to respond decisively should it perceive a significant shift in the balance.

What remains indeterminate is how this dynamic will unfold, whether Ottawa can successfully navigate the delicate equilibrium between economic benefit and political security, and what the cascading consequences may be for global trade patterns. The outcome of this balancing act will not only influence the economic trajectories of Canada and China but also shape Washington's strategic calculus within the Asia-Pacific region.

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