As Prime Minister Mark Carney’s government navigates the turbulent waters of international diplomacy, particularly with the unpredictable administration to the south, Canadian businesses engaged in trade with China are sounding the alarm. They assert that Ottawa must work swiftly to expand exports to China, a market regarded as critical for Canada’s economic future.
A Healing Relationship
The Canada-China relationship, which has faced significant challenges in recent years, shows signs of recovery. At a recent first ministers’ meeting in Saskatoon, Carney announced that federal and Chinese officials will re-engage at the ministerial level to tackle the tit-for-tat trade war that has characterized recent exchanges between the two nations. This conflict has seen Canada impose 100% tariffs on Chinese-made electric vehicles, while China retaliated with similar duties on canola meal, pork, and seafood.
“Negotiations with China are a top priority,” Carney emphasized, aiming to lift counter-tariffs and establish regular communications between the countries. The backdrop of U.S. tariffs, particularly the 50% levies on Canadian steel and aluminum imports, complicates the context, further urging Ottawa to strengthen its economic strategies.
Opportunity Amid Hurdles
Despite ongoing political tensions, Canadian businesses are optimistic about the potential for growth with China. Statistics Canada recently indicated that while exports to the U.S. decreased by 15.7% in April, exports to other countries—including China—actually increased by 2.9%. Notably, oil exports to China have surged since the start of the Trans Mountain Pipeline in May 2024, positioning China as a major customer for Canadian crude.
According to the Conference Board of Canada, overcoming the political hurdles in the Canada-China relationship could position China as a pivotal export market for Canada. Senior economist Liam Daly remarked, “There’s clearly demand… Chinese demand is willing to fill the gap left by the closing of access to American markets.”
Yet, as Canada exported $30 billion worth of products to China in 2024, this pales in comparison to the staggering $500 billion sent to the U.S. Additionally, Canada is grappling with a trade deficit of $57 billion with China, highlighting a pressing need for dialogue and negotiation.
The Path to Increasing Exports
Industry experts suggest that the removal of tariffs would likely pave the way for a significant increase in exports of raw goods such as timber, wheat, lentils, and energy. Josipa Petrunic, CEO of the Canadian Urban Transit Research & Innovation Consortium (CUTRIC), believes that low-hanging fruit such as agricultural products could be ripe for export due to fewer intellectual property concerns.
Reliable Partnerships
Canadian businesses are advocating for improved trade relations, with many finding opportunities in the Chinese market. Bijan Ahmadi, executive director of the Canada China Business Council, noted, “China represents significant opportunities for Canadian companies.” For instance, Laneway Distillers, a Toronto-based alcohol company, has started exporting their products to Chinese e-commerce platforms.
Co-founder Jessica Chester expressed surprise at the efficiencies in doing business in China compared to navigating regulations in Ontario, which she finds complex. She remains hopeful that interprovincial trade barriers will soon be lifted, enabling further growth.
The Challenge of State Subsidies
While the potential for trade exists, Canada must navigate challenges such as China’s practice of subsidizing its industries, a factor that can create unfair competition. Furthermore, despite the scale of the Chinese market, analysts caution that economic realities may complicate prospects. Low consumer spending in China raises questions about its capacity to absorb increased imports from Canada.
The Shadow of Political Tensions
Political relations between Canada and China remain fraught with tension, partly due to the ongoing ramifications of the detention of Canadian citizens Michael Spavor and Michael Kovrig. The geopolitical climate necessitates that any discussions about trade with China are framed within this complex history. Petrunic insists that these realities must be acknowledged in negotiations.
Navigating the U.S. Influence
As Canada contemplates expanding its trade with China, it must do so without alienating its largest trading partner, the U.S. The rhetoric from the Trump administration continues to complicate international relations, and experts agree that it is vital for Canada to balance its interests carefully.
Daly observes, “I think there’s a path forward… to increase trade with China, while not falling afoul of what is an increasingly punitive administration in Washington.”
Conclusion
As Canada looks to the future, the endeavor to bolster trade relations with China becomes an urgent necessity amid changing global dynamics. With the right policies and negotiations, Canada can position itself to not only recover lost ground but also to secure significant economic opportunities in one of the world’s largest markets. The road ahead may be fraught with challenges, but the potential rewards make this a venture worth pursuing.