Canada-China Announce a New Strategic Partnership

Just two days after President Donald Trump described the USMCA as ‘irrelevant’, Canada has forged a framework for a new strategic partnership with China, its second-largest trading partner — albeit only a small fraction of its first-place American partner.

Canadian Prime Minister Mark Carney said the preliminary deal with China is structured to remove trade barriers and to reduce tariffs. He went on to say that President Xi told him that China is also willing to strengthen its coordination with Canada to address global political challenges.

Under the goods portion of the deal, China is expected to lower tariffs on Canadian canola seed and meal from 84% to an average 15% tariff by March 1st.

“This is enormous progress," Carney noted.  "Starting from March 1st, we fully expect canola tariffs to drop from 85% to approximately 15%. And that’s going to create an opportunity combined, between meal and seed, a seven-billion-dollar market opportunity. A new era, whether it’s in canola, other grains, pulses, lobster, beef, pork, it’s a return to Canada as an important agricultural partner with China.”

Saskatchewan is the single largest producer of canola products and a major pulse grower.  That province’s premier, Scott Moe, was part of the Canadian trade delegation to China.  Premier Moe was extremely pleased with the trip’s outcome.

“It is going to literally allow billions of dollars of agricultural products of all kinds, whether its canola, pulse crops, or seafood, to flow again, with additional exports into China as well," Moe said.  "So, a good day for Canadians.”

Conversely, Ottawa has agreed to accept Chinese electric vehicles, in the first year to a market cap equaling three percent of Canada’s new car market, with a 6% tariff rate.

“Let’s put this in context. 49,000 vehicles, which is the cap on Chinese electric exports to Canada," Carney said.  "Canadians buy about one-point-eight million autos a year. So, that’s less than three percent of the size of the Canadian auto market. That allows for a smooth transition to get more affordable cars in the electric vehicle market for Canada.”

It’s now been reported that the Canadian government provided U.S. trade officials with notice that it planned to offer lower tariffs on limited numbers of Chinese vehicles in its negotiations.

U.S. Trade Representative Jamieson Greer’s reaction to the Canada-China deal was only to say that such low numbers of Chinese vehicles would not adversely impact American companies’ exports to Canada.  And President Trump’s response, when hearing of the deal, was almost one of approval.

“Well, that’s okay, that’s what he should be doing," Trump said.  "I mean, it’s a good thing for him to sign a trade deal. If you can get a deal with China you should do that.”

Carney said that, although Canada’s historic relationship with the U.S. is much deeper and broader, Canada’s current relationship with Bejing seems to be more predictable than its relationship, right now, with Washington D.C.  Taking the long view, Carney stated that Ottawa hopes to grow Canada’s non-U.S. trade by at least 50% over the next decade.

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