BY EMMANUEL OGBONNA
America’s closest trading partners are increasingly looking beyond the United States as President Donald Trump presses ahead with aggressive and often unpredictable trade policies, prompting concerns about long-term economic stability and reliability in Washington.
Canada delivered one of the clearest signals yet of this shift on Friday, striking a preliminary trade understanding with China that sharply reduces its 100% import tax on Chinese electric vehicles in exchange for lower Chinese tariffs on Canadian agricultural products, particularly canola. The move marks a notable departure from Canada’s recent alignment with U.S. trade policy and underscores growing unease in Ottawa over its economic dependence on its southern neighbor.
“It’s a huge declaration of realignment in Canada’s economic relations,” said Edward Alden, a senior fellow at the Council on Foreign Relations who studies global trade. “The economic threat from the United States is now perceived by Canadians as far bigger than the economic threat from China. That’s a profound change.”
Canada’s recalibration follows months of strained relations with Washington. Trump has repeatedly singled out Canada for tariff threats, sometimes with little warning. In October, he announced plans to impose a 10% tariff on Canadian imports after Ontario’s provincial government aired an advertisement critical of his tariff-driven diplomatic strategy. Although that specific tariff was never implemented, U.S. duties remain in place on key Canadian exports, including steel and aluminum, keeping tensions high.
The agreement with Beijing carries political and economic risks for Canadian Prime Minister Mark Carney, particularly as it comes just ahead of negotiations over the renewal of the North American trade agreement, a cornerstone of Canada’s export-driven economy. Any move seen as undercutting U.S. trade interests could provoke retaliation from the White House at a sensitive moment.
Canada’s shift is part of a broader global trend. As Trump imposes sweeping tariffs on imports from nearly every major economy, governments are accelerating efforts to diversify their trade relationships and reduce reliance on the U.S. market. The European Union is expected to formally sign a long-negotiated trade pact with the South American bloc Mercosur, which includes Brazil and Argentina, and is also pursuing deeper trade ties with India.
China, heavily targeted by U.S. tariffs since Trump’s first term, has already made significant progress in redirecting exports away from the American market. Chinese government data show the country’s trade surplus with the rest of the world surged to a record $1.2 trillion in 2025, even as shipments to the United States declined sharply. Europe and Southeast Asia have emerged as key alternative destinations.
Since returning to the White House in January, Trump has upended decades of U.S. support for freer trade. His administration has imposed double-digit tariffs on imports from most countries while also targeting specific industries, including steel and automobiles. Trump argues the strategy will generate revenue for the U.S. Treasury, protect domestic industries and force companies to invest and manufacture in the United States.
In some cases, the approach has produced quick concessions. This week, Taiwan agreed to invest $250 billion in the U.S. after Trump reduced tariffs on Taiwanese goods from 20% to 15%. But critics say such deals underscore how tariffs are being wielded less as a coherent economic policy and more as a blunt negotiating weapon.
The unpredictability has unsettled allies. Trump has threatened Brazil with tariffs over the prosecution of former president Jair Bolsonaro, a political ally, and on Friday warned that countries opposing his push for U.S. control of Greenland could also face trade penalties.
Canada’s decision to soften its stance toward China highlights the difficult choices facing middle powers caught between Washington and Beijing. Just last year, Ottawa followed the U.S. in imposing steep tariffs on Chinese electric vehicles, citing fears that low-cost imports would overwhelm North American automakers. The new deal reverses that approach, at least in part.
For Canada, the benefits are immediate. Canola farmers, who have struggled to access overseas markets, stand to gain significantly after China agreed to cut its tariff on canola imports from 84% to 15%. Farm groups welcomed the move, saying it could restore exports of one of the country’s most valuable crops.
The agreement also reflects deeper concerns about the future of the North American auto industry. The Trump administration has deprioritized electric vehicles in favor of fossil fuels, a stance that economists say risks leaving the continent behind as China rapidly advances in battery technology and EV manufacturing.
“The United States is actively hostile to EV production in North America,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “That threatens to make the industry obsolete as China moves ahead with rapid improvements in quality and cost.”
Carney defended the agreement by pointing to China’s technological leadership. “China produces some of the most affordable and energy-efficient vehicles in the world,” he said. “If Canada wants to build a competitive EV sector, we need to learn from innovative partners, tap into global supply chains and grow domestic demand.”
Still, the rapprochement with Beijing is politically fraught. Canada’s relationship with China has been strained for years, notably after China detained two Canadians in 2018 following Canada’s arrest of a Chinese technology executive at U.S. request. Those detainees were released in a 2021 swap. More recently, Ottawa has investigated allegations of Chinese interference in Canadian elections.
Domestically, the deal has drawn criticism from labor leaders and provincial officials worried about competition from low-cost Chinese vehicles. Ontario Premier Doug Ford, whose province anchors Canada’s auto industry, warned that the agreement could harm Canadian workers and jeopardize access to the U.S. market.
“China now has a foothold in the Canadian market and will use it to their full advantage at the expense of Canadian workers,” Ford said, arguing the deal risks alienating Canada’s largest trading partner.
Carney responded by stressing that the agreement includes strict limits, allowing only 49,000 Chinese electric vehicles into Canada at the reduced tariff rate, rising to about 70,000 over five years.
The greater uncertainty lies south of the border. The U.S.-Mexico-Canada Agreement, which allows most goods to move duty-free across North America, comes up for renewal this year. Trump has signaled he wants major changes to push more manufacturing into the United States and has repeatedly threatened to withdraw altogether.
That prospect looms large for Canada, which sends roughly three-quarters of its goods exports to the U.S. Analysts warn that Ottawa’s outreach to China could complicate negotiations.
“Trump will not be pleased,” said William Reinsch, a former U.S. trade official now with the Center for Strategic and International Studies. “He is likely to retaliate, probably against the Canadian auto industry, and will almost certainly raise this in the trade talks.”
Trump struck a more conciliatory tone on Friday, publicly praising Carney’s efforts and saying countries should pursue deals where they can. Carney, for his part, emphasized that the agreement with China remains preliminary, leaving room for adjustments if tensions with Washington escalate.
Canadian officials may also be counting on pressure from U.S. businesses that benefit from integrated North American supply chains. Automakers, farmers and technology companies all rely heavily on the existing trade framework and are expected to lobby aggressively to preserve it.
For now, economists say Canada’s move sends a clear message. “It signals that Canada is looking elsewhere and has options,” Lovely said. “It shows Ottawa is prepared to walk away rather than accept terms that serve only American interests.”
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