Canada’s Bet on Beijing Puts USMCA at Risk

Does Canadian Prime Minister Mark Carney really consider China to be a “more predictable” partner than the United States? During a visit to Beijing last week, Carney unveiled a “new strategic partnership” between the two nations that could be detrimental to U.S.-Canada relations. It could also jeopardize the United States-Mexico-Canada Agreement (USMCA) renegotiations slated for July.

Under the partnership announced on January 16, Canada agreed to admit up to 49,000 Chinese electric vehicles (EV) — constituting nearly 20 percent of all new EVs sold in Canada in 2024 — in exchange for Beijing lowering duties on canola seeds, used in industrial production, food preparation, and livestock feed, to 15 percent by March. The countries are also working to further increase investments in and exports of Canadian energy to China. Carney may view these moves as generating leverage ahead of the upcoming USMCA renegotiations, but they are more likely to harden the U.S. position than soften it.

The EV Deal and Its Risks

Chinese EVs represent a significant threat to Canada’s automotive industry. In tandem with the United States, Canada levied 100 percent tariffs on Chinese EV imports in 2024 to combat manipulative trade practices that then-Prime Minister Justin Trudeau said gave China an “unfair advantage in the global marketplace.”

Chinese EVs are priced artificially low to undercut foreign competitors and erode foreign industry. Inviting Chinese EVs into Canada’s market — let alone prioritizing importation of the cheapest options — is a mistake. Recognizing this risk, Ontario Premier Doug Ford condemned the deal, warning on January 16 that China now has a “foothold” in Canada that it will use “at the expense of Canadian workers.”

The partnership also threatens North American automotive production, a key aspect of USMCA. Car parts cross the U.S.-Canada border up to eight times during the manufacturing and assembling of a vehicle. An opening to Chinese EVs will introduce risks to an ecosystem that depends on North American supply chain integration.

Implications for USMCA

Canada’s deal with Beijing disrupts what appeared to be a path toward a smoother USMCA renegotiation process. Mexican President Claudia Sheibaum had signaled a willingness to stabilize the trade relationship with the U.S. and make needed tariff concessions on China-related concerns. And prior to the partnership with Beijing, Carney seemed to be warming to Trump following months of tension.

More fundamentally, the partnership between China and Canada undermines the premise that North America will be able to function as a unified trade bloc with shared enforcement mechanisms. Given the deep economic integration between the three economies, a shift to more bilateral arrangements would be a worse outcome and threaten the 17 million jobs dependent on trilateral trade.

Impacts on Energy

The U.S.-Canada energy relationship is tightly integrated. American refineries are designed to refine Canadian crude, but the energy framework included in its trade deal with China makes clear that Ottawa is actively exploring alternatives, even touting potential roles for Chinese companies in Canada’s expanding energy grid.  

Last year alone, Canada’s energy exports to China grew 81 percent. Additional pipeline projects to China, among other countries in Asia, may significantly reduce American access to Canadian energy and complicate the bilateral relationship with Washington.

North American energy independence is one of our continent’s greatest economic advantages. Sacrificing it for China could force the United States to recalibrate its northern strategy altogether.

The Stakes for North America

This past year, 2025, was one of the most difficult years in recent memory for U.S.-Canadian economic engagement. The United States played a significant role in damaging these ties, but Canada is now making its own mistakes. Rather than elevate trade tensions, the United States and Mexico should be identifying areas for further investment and co-production with Canada in the automotive, critical minerals, and other priority sectors; harmonizing trade enforcement measures that combat Chinese dumping and tariff evasion; and doubling down on labor, immigration, and workforce upskilling that will sustain the North American free trade engine.

A reset built upon security concerns and national economic interests is needed. North American economic security depends on it.

Elaine Dezenski is senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Susan Soh is a research associate. For more analysis from Elaine, Susan, and FDD, please subscribe HERE. Follow Elaine on X @ElaineDezenski. Follow Susan on X @SusanSoh827. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.