How Canada’s Political Shift Could Redefine China Trade Relations

On March 9, 2025, Mark Carney was elected leader of Canada’s ruling Liberal Party and subsequently became Prime Minister, following the resignation of Justin Trudeau in January. His swearing-in on March 14 comes at a critical moment for Canadian trade, amid growing tensions with the U.S. and a shifting global economic order.

Carney’s leadership presents a pivotal opportunity to recalibrate Canada’s international relationships—particularly with China—against the backdrop of rising protectionism in Washington. Having spent years in global financial leadership roles, Carney brings to office a deep understanding of international trade and a track record of engaging with Chinese economic institutions. His past rhetoric suggests a willingness to strengthen economic ties, especially in sectors like clean energy, technology, and sustainable finance.

However, Carney’s tenure may be short-lived. He is widely expected to call an early election within weeks, potentially handing power to opposition leader Pierre Poilievre. Poilievre has positioned himself as a hardliner on China, advocating for more aggressive trade restrictions, increased scrutiny of foreign investment, and stronger national security measures.

Looking Back: Trudeau’s Legacy in Canada-China Trade Relations

Under Justin Trudeau, Canada’s relationship with China experienced both ambition and discord. Early efforts to build closer ties included discussions around a free trade agreement and joint work on infrastructure and climate. But the arrest of a senior Huawei executive in 2018, and China’s subsequent retaliation through trade barriers, marked a sharp downturn in bilateral relations.

During Trudeau’s final years, Canada imposed tariffs mirroring those of the U.S., including on electric vehicles and metals, prompting further retaliation from Beijing. By 2024, the trade relationship had become increasingly volatile, with key Canadian exports like canola, beef, and pork facing Chinese restrictions.

Carney’s Approach: Cautious Engagement

Though Carney hasn’t yet outlined a full China policy, his professional history offers clues. As a former central bank governor and financial diplomat, Carney has consistently advocated for diversified trade relationships. He’s also participated in high-level dialogues with Chinese leaders and supported deeper collaboration in areas like green finance and infrastructure.

Nevertheless, Carney’s economic strategy includes recognizing China as a national security competitor—particularly in advanced technology sectors. His economic plan to make Canada the strongest G7 economy notes China’s ambitions in AI and tech as risks that need to be managed carefully.

Resolving existing disputes—such as recent tit-for-tat tariffs on energy, agricultural, and industrial goods—will require diplomatic finesse. There may be an opening to reset ties, but Carney will need to navigate strong domestic skepticism.

Trade Diversification and the China Factor

Carney’s push to reduce dependence on the U.S. could naturally steer attention back toward Asia. China remains a significant importer of natural gas, agriculture, and seafood—three areas where Canadian exporters are currently squeezed by American protectionism.

With new LNG terminals like LNG Canada and Cedar LNG set to open on the West Coast, Canada is in a strong position to compete for Chinese energy demand. Similarly, in agriculture, shifting more exports to China could help counteract losses from U.S. tariffs and reduce overreliance on a single trading partner.

Still, tensions remain high. In October 2024, Canada imposed steep tariffs on Chinese EVs and industrial goods, which were met with swift retaliatory tariffs on Canadian agricultural and seafood exports. Ongoing investigations, such as China’s anti-dumping probe into Canadian rapeseed, add further complexity.

Climate as Common Ground

Despite trade frictions, climate policy may offer neutral ground for engagement. Carney’s background includes senior roles in global climate finance initiatives, where he has advocated for coordinated international action. He has praised China’s advancements in green energy and called for expanded cooperation on carbon reduction technologies.

Canada, with its expertise in carbon pricing and regulatory design, could complement China’s manufacturing capabilities in clean energy. Strategic collaboration in battery technology, critical minerals, and hydrogen could help both countries maintain momentum in their respective low-carbon transitions—particularly as the U.S. retreats from climate leadership under President Trump.

Such engagement would not only have environmental benefits but could serve as a stabilizing force in an otherwise rocky bilateral relationship.

Walking the Tightrope: Canada’s Balancing Act

Managing the U.S.-China rivalry will be one of Carney’s defining foreign policy challenges. With Trump’s administration leaning heavily into protectionist and anti-China policies, Canada faces pressure to align with Washington—particularly on issues like tech security and narcotics trafficking.

At the same time, China has expressed interest in repairing bilateral ties. Recent public statements from Beijing suggest a willingness to engage pragmatically, provided Ottawa takes steps to de-escalate tensions.

Carney’s ability to navigate between these two poles—leveraging China for economic diversification while staying in Washington’s good graces—will shape the future of Canadian trade policy. His decisions will be closely scrutinized both at home and abroad.

The Poilievre Variable

Should Carney call a snap election, his approach to China could be overtaken by a new political reality. Pierre Poilievre’s Conservative Party is currently polling ahead and has staked out a far more confrontational China policy. He supports bans on Chinese tech firms, limits on foreign ownership in strategic sectors, and has backed retaliatory tariffs in line with U.S. measures.

The Conservatives have proposed suspending China from the WTO until it implements market reforms and have advocated for decoupling Canadian research institutions from Chinese collaboration. Under Poilievre, any rapprochement is unlikely; a shift toward strategic containment would be more probable.

Implications for Business

Canadian firms operating in sectors affected by China relations—such as energy, agriculture, mining, and clean tech—should prepare for a period of uncertainty. While Carney may favor re-engagement, political volatility and international pressures may constrain his ability to act decisively.

At the same time, companies focused on green technologies could find opportunity in cross-border collaboration, particularly if climate becomes a focal point for engagement. Exporters should closely monitor tariff developments and explore diversified markets as geopolitical tensions continue to evolve.

Regardless of who holds office, it’s clear that China will remain a key variable in Canada’s international strategy. Businesses should plan accordingly, hedging risk while remaining alert to emerging opportunities in a rapidly changing landscape.

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