China

There is no doubt that China uses tariffs to punish other countries for infractions. They also use hostage diplomacy as we saw from the Two Michaels situation when two businessman were abducted when Canada responded to an extradition request from the U.S. for a Chinese exec. The Americans left us out to dry with that and we are still facing the consequences of that.

And this is part of the problem we face today is superpowers trying to acquire land, assets and influence. To an extent this has always been the way over the centuries with continental blocs held together by similar interests with one dominant who pushed their agenda the most. The Western Bloc, the Eastern Bloc and the Asian Bloc or whatever names they were called over time.

In recent years, the western alliance of NATO has been in ascendancy in that has grown and Europe by itself has become a a powerful bloc. Canada, by virtue of being a G7 country, founding member of NATO and for European ties, is part of a trans-Atlantic alliance. The U.S. is by far the largest entity in the Western alliance militarily and economically. At its best it is an example of democracy and economic innovation. At its worst, it can be authoritarian and a military menace.

Since the 1980s Canada has had a series of free trade agreements that has cemented our position as a primary trading partner with the U.S. and Mexico. It has become such a large percentage that some businesses have not really sought to expand their business elsewhere. That is, except for agriculture, where the U.S. market is saturated and protected that Canada exports around the world. 

The top two market of China and the U.S. in recent years punish Canada on trade for not obeying them. Canada is no longer naïve about China. Even in the Harper years there was a belief we could sell incredible amounts of product to China and not be dependent on the U.S. and Mexico. However, Canada quickly learned that China was looking at Canadian technology and manufacturing to access that information and then use it in their own products and limit Canadian trade. We weren't the only ones. The U.S. and Europeans also learned that China was not looking for a true free trade agreement.

So in 2026, Canada is back talking with China with a more nuanced approach. It is looking to trade more with China, especially with food but also on cheap EVs. However, like we did with the Koreans and Japanese in the 1980s, we are looking to draw more manufacturing to the country. If Ontario auto plant workers are working for BYD or GM, what does it matter? This should not be a hard thing. If the U.S. is trying to end all manufacturing of cars in Canada, why should we not seek out other manufacturers? The expectation that we only buy expensive cars from the States is nonsense.

The premier of Ontario Doug Ford is outraged about the deal to let Chinese electric vehicles in but it really goes back to 2022/23 in terms of what was in place prior. Ontario benefits now as Chinese purchases canola resume. Beef sales are also resuming. This is a good thing in a years long tariffs war. It isn't perfect or addresses interference in elections, espionage or human rights. Nothing is said on Taiwan. Canada isn't rolling over on these issues but is more likely to pick their battles more carefully. It is why Carney is going from country to country to limit our exposure to only one export market and to form buffer against dependency. This is hard when 75% of your export trade goes to the U.S.

In the 1980s there was a lot of fear about Honda, Toyota and Hyundai and Canada got them to build manufacturing plants in Ontario. I think there will wide acknowledgement that it helped makes cars affordable and the quality across the board went up. Ideally, a portion of the manufacturing comes to Canada. Some critics say it won't and say the country will lose manufacturing just as Australia did. That is possible even if Canada doesn't import Chinese EVs.

If the U.S. ends the free trade agreement with cars, all the manufacturers could move to the U.S. which is probably not great for GM, Ford and Stellantis (Chrysler). As it stands now, Canada depends on billions of subsidies to keep the car plants in Canada. Norway, Denmark and Australia don't have car industries and remain prosperous and even more productive. However, losing all your manufacturing has consequences. One example is that Canada used to produce all its vaccines. When Covid happened, we had no ability to produce anything and China cut us off.

For those who lobby strictly for only private aspects for the market, it can leave you vulnerable you to market manipulation that ends up being anti-competitive. Even within Canada anticompetitive behaviours by business. The right balance of government and business is difficult to gage. Perhaps the ones that create the fewest imbalances in society are the best.

Around 5% of export trade goes to China. That represents a lot of agriculture. For pork products that means the whole pig unlike Canada where not all is used. Because of China's past, we have to ensure that we seek out even more markets for our goods. Some things such as potash or oil products can go anywhere. As can critical minerals. The truth is we haven't looked much because we believed the U.S. market was always available. Selling gold recently has helped Canada in its international trade. India, for example, imports a lot of gold.

I don't think anyone is naïve about China in the Canadian government about the risks involved. The Carney government has to mindful of espionage, military escalation and other issues that come up. It is likely Carney won't be vocal in public about what some of the red lines are. However, I expect spies and aggressive behaviour over territory will not be ignored.

The world has been doing a lot of talking about what Canada is doing on the global stage. From Davos to Beijing, we are not doing what has been done in the past. We can't. The threats have just been too great.