Canada Rules Out Free Trade Deal With China Amid Trump Tariff Threats, Says PM Mark Carney

What happened:
Canadian Prime Minister Mark Carney has said that Ottawa has no plans to pursue a free trade agreement (FTA) with China, pushing back against claims by US President Donald Trump that Canada is moving closer to Beijing on trade.

Why it matters now:
The clarification comes amid escalating tensions between Canada and the US, after Trump threatened to impose 100% tariffs on Canadian goods if Ottawa entered into a free trade deal with China. The dispute has widened into a broader geopolitical standoff involving trade, tariffs, and North American supply chains.

What Carney said:
Speaking on January 25, Carney stressed that Canada remains bound by commitments under the United States-Mexico-Canada Agreement (USMCA), which restrict member countries from pursuing FTAs with “non-market economies” without prior consultation.

“We have no intention of doing that with China or any other non-market economy,” Carney said.
“What we have done with China is to rectify some issues that developed in the last couple of years.”

He clarified that Canada’s recent engagement with Beijing involved limited tariff adjustments, not a comprehensive trade agreement.

Background: Tariff war and partial rollback
In 2024, Canada aligned with the US by imposing:

• 100% tariffs on Chinese electric vehicles (EVs)

• 25% tariffs on Chinese steel and aluminium

China retaliated with:

• 100% import taxes on Canadian canola oil and meal

• 25% tariffs on pork and seafood

Earlier this month, during a visit to China, Carney announced a partial rollback of tariffs on Chinese EVs in exchange for reduced Chinese duties on Canadian agricultural exports.

Under the revised framework:

• Chinese EV imports into Canada will face a 6.1% tariff

• An initial annual cap of 49,000 vehicles, rising to about 70,000 over five years

• Chinese EVs would account for roughly 3% of Canada’s 1.8 million annual vehicle sales

Carney said the arrangement could also lead to Chinese investment in Canada’s auto sector within three years.

Trump escalates rhetoric
Trump has sharply criticised the move, accusing Canada of opening the door for Chinese goods to enter the US market indirectly.

“China is successfully and completely taking over the once Great Country of Canada,” Trump wrote on social media.
“I only hope they leave Ice Hockey alone!”

He later warned that Canada would not be allowed to become a “drop-off port” for Chinese exports into the US.

US Treasury Secretary Scott Bessent echoed the concern, saying Washington would not allow China to use Canada as a trade backdoor, especially ahead of the planned USMCA renegotiation this summer.

Auto industry at the centre
Trump also shared a video quoting the head of the Canadian Vehicle Manufacturers’ Association, who warned that Canada’s auto industry depends heavily on access to the US market and cannot survive on domestic demand alone.

“The China deal is a disaster for them,” Trump said.
“Will go down as one of the worst deals, of any kind, in history.”

Bigger geopolitical clash
The dispute unfolds against a backdrop of worsening relations between Trump and Carney, including Trump’s controversial push to acquire Greenland, which has strained NATO unity.

Carney has emerged as a vocal advocate for middle powers acting together to resist pressure from major powers. Speaking at the World Economic Forum in Davos, he said:

“If you are not at the table, you are on the menu.”

The remarks drew widespread attention and were seen as a subtle rebuke of Trump’s aggressive foreign policy posture.

What to watch next:

• Potential US tariff action against Canada

• USMCA renegotiations later this year

• China’s follow-through on promised investment in Canada’s auto sector

• Whether Canada’s calibrated China engagement reshapes North American trade dynamics

For now, Ottawa is drawing a firm line: no free trade deal with China, even as it tries to balance economic interests amid growing US pressure.