In a significant shift in global trade dynamics, Canada has signalled it will not move forward with any free trade agreement with China, a decision that comes in the immediate aftermath of a strong warning from US President Donald Trump, who threatened to impose tariffs of up to 100% on Canadian exports if Ottawa pursued a deal with Beijing.
Canada’s position is being viewed as a reaffirmation of its commitments under the United States–Mexico–Canada Agreement (USMCA), known as CUSMA in Canada. Ottawa has underlined that the trilateral trade pact obliges it to consult its North American partners before entering into any free trade agreement with a third country, particularly when such a deal could affect regional trade balances.
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The development comes at a time when US–Canada relations are already under visible strain. President Trump has repeatedly accused Canada of potentially acting as a conduit for Chinese goods into the American market. In a series of public remarks and social media posts, Trump warned that Washington would respond decisively if Canada attempted to give China what he described as a “backdoor entry” into the US economy.
Canada’s announcement effectively pauses months of speculation over a possible deepening of economic ties with China. Earlier this month, on January 16, Ottawa and Beijing had reached a preliminary understanding that reignited debate about the future direction of Canada’s trade policy.
Under that initial arrangement, Canada had agreed to allow approximately 49,000 Chinese electric vehicles annually into its market at a lower tariff rate. In return, China signalled concessions on a range of Canadian agricultural exports, a move that was seen as beneficial for Canadian farmers facing volatile global demand.
Only months earlier, in October 2024, Canada had sharply raised tariffs on Chinese electric vehicles to as high as 100%, citing concerns over domestic manufacturing and unfair competition. The January understanding appeared to mark a partial reversal of that stance and was interpreted as an attempt by Ottawa to balance economic pragmatism with industrial protection.
China, for its part, had proposed significant tariff relief. This included reducing duties on canola seed oil from 85% to 15% starting March, and removing additional charges on products such as canola meal, lobster, crab and peas until the end of 2026. The concessions were expected to provide relief to key Canadian export sectors.
However, President Trump’s latest tariff threat has altered the political calculus in Ottawa. Trade analysts say the warning left Canada with little room to manoeuvre, given the scale and sensitivity of its economic relationship with the United States.
The US remains Canada’s largest trading partner by a wide margin, with bilateral trade running into hundreds of billions of dollars annually. Any disruption to this relationship, experts argue, would have immediate consequences for Canadian manufacturing, energy exports and employment.
Tensions between Washington and Ottawa have been building in recent weeks. The Trump administration has taken a harder line on trade enforcement, while Canadian leaders have voiced concern over the increasing use of economic pressure as a diplomatic tool. These undercurrents were evident at recent global forums, where Canada warned against the weaponisation of trade in an increasingly fragmented world economy.
Trade experts note that Canada is now facing a strategic balancing challenge. While China offers long-term growth opportunities and access to a vast consumer market, the economic and political costs of alienating the United States are far higher and more immediate.
The episode also reflects a broader global trend, where trade agreements are being shaped as much by geopolitics as by economics. President Trump’s tariff-driven approach and ongoing tensions between China and Western economies are forcing middle powers to make difficult choices.
For now, by stepping back from a China trade deal, Canada has made it clear that it is unwilling to risk a direct confrontation with its most important economic partner. Whether this retreat proves temporary or signals a more permanent realignment in Canada’s trade strategy will become clearer in the months ahead — but the message from Washington has already reshaped the conversation.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
