The need for Canada to focus on the management of geopolitical risks in its trade policy discussions has become progressively more apparent as the international context grows more unsettled. Donald Trump’s re-election last week will only reinforce this instinct and its implications for Canadian policymaking. Policy wonks have been increasingly analyzing ways to protect what has become known as “economic security.” Canada’s government even held public consultations this past summer on possible ways to protect Canada’s economy from protectionist or coercive economic practices from other countries.
Whether in D.C., Brussels, or Ottawa, China is of course the country at the heart of these discussions. China’s economic statecraft is examined mainly as a threat, downplaying the economic opportunity provided by Canada’s access to the Chinese market.
As the incoming Trump administration plans to impose significant tariffs against Chinese imports, it’s easy to conclude that Canada needs to take its own protectionist measures against China. Yet we shouldn’t be sanguine about heading down a path of protectionism. The costs and consequences for Canada could be significant. As a trading nation, Canada’s economic success depends on our ability to sell our products to other countries. Agri-food is responsible for one in nine jobs in Canada, and the majority are in export-based agri-food. There are currently more jobs in the agri-food sector than in autos and aerospace combined.
In 2022, Canada exported $92.8 billion in agriculture and food products to 200 countries. The international rules-based system is a key element of our success, and it is in Canada’s national interest to strengthen this system. We should take great care not to undermine it, even in light of the twin challenges of China’s economic strategy and the incoming Trump administration’s signalling on tariffs.
We should also avoid shooting ourselves in the foot with silly and provocative inwardly focused initiatives like Bill C-282, which seeks to protect supply management at the expense of Canada’s international reputation.
In light of Trump’s tariff threats, while it is understandable that the government wants to align itself with the United States, our closest trading partner and with whom we look forward to a potentially complicated CUSMA review in 2026, we shouldn’t act precipitously. There are ways for Canada to keep onside with Washington while understanding that our geostrategic position is not exactly the same.
As a middle power, Canada needs to be more nuanced and avoid framing our trade policy in a way that invites a Chinese response—especially since there’s no reason to assume that the Trump administration would back us up.
The tone and emphasis of our statements can also matter. The government’s messaging has covered a gamut of complaints about China, from economic threats to values-based judgments. Our economic interest is clearly to sell product to China, regardless of our views on its human rights record. It is therefore risky to suggest that we do not want Chinese inputs because of the same record.
There are logical limits to gratuitously throwing values-based language into an economic security discussion, and we should not forget that our American partners may be about to reduce their emphasis on such language.
Recently, the Canadian government used Section 53 of the Customs Tariff to impose an across-the-board 100 percent tariff on Chinese EVs, rather than thoroughly investigating Chinese companies to determine the level of tariff to apply. The EU has gone in the opposite direction, undertaking formal investigations that are more aligned with the rules of the World Trade Organization (WTO).
Even if one accepts that China’s EV policy is inherently unfair and in contravention of the WTO’s rules, there’s a case that as a middle power, Canada would have been better off by following that process. As Philippe Rheault and Anton Malkin, two scholars at the University of Alberta’s China Institute, recently put it, “by not even purporting to play by WTO rules in this case, Canada is undermining its reputation as a strong proponent of fair trade and of the rules-based international trading system—an outcome that could cost it elsewhere as well.
Similarly, the Canada West Foundation’s Jeff Mahon has argued that the Canadian approach framed our actions in a way that did not allow China to save face, increasing the likelihood of retaliation.
If we take further measures against China, we ought to be more careful about WTO compliance than we were in the case of the Chinese EV tariff. At a minimum, we need to be more clear-eyed about the trade-offs involved.
By protecting one segment of the Canadian economy, we are putting other sectors—including our agri-food exports—at risk. Given the relative size of agri-food exports, it should be viewed as an equal and arguably more important part of any calculus of Canada’s national interest—this includes supporting the sector if we are traded off against another sector and targeted by China.
Some argue that the international rules-based system, with the WTO at its heart, has been mortally wounded by China’s entry into the system without adopting its values and the subsequent U.S. responses to this challenge. No matter the administration in Washington, this is a dangerous position for Canada to adopt. The rules may need to be updated, and the U.S. may push in this direction, but it is not in Canada’s national interest to contribute to their weakening. We should be working with other countries to face these challenges in the WTO context, as well as in traditional forums of like-minded countries like the G7.
In an increasingly uncertain global context, Canada cannot afford to disengage from this rules-based system or those willing to engage in free, fair, and mutually beneficial trade. Doing so will only leave Canada poorer and more insecure overall in the short- and long-term.
