China’s decision to impose an exclusionary 75.8 percent tariff on Canadian canola exports this week comes at a pivotal moment for Canada’s trade relationships with both China and the U.S. The move raises questions about whether Beijing is targeting Canada as a proxy trade war that ties into broader tensions with America.
The Hub spoke with Bill Hawkins, head of trade and investment at Sussex Strategy Group and a former chief of staff to Canada’s Minister of International Trade, to better understand the implications of China’s latest trade action and how it fits into the evolving dynamics of North American trade policy.
Here are five key takeaways from the conversation:
1. China is using economic coercion to pressure Canada ahead of its EV tariff review: The timing of the new canola seed tariffs, imposed just a couple of months before Canada’s one-year anniversary review of its EV tariffs imposed last October, represents strategic leverage designed to influence Canadian policy decisions.
2. Canada has become China’s preferred target for retaliation over the United States: While China challenged both Canada and the EU at the WTO over EV tariffs, it has imposed harsh counter-tariffs specifically on Canada while leaving U.S. tariffs largely unanswered.
3. The trade dispute reflects broader G7 coordination against Chinese attempts at EV dominance: Canada’s decision to impose EV tariffs was part of coordinated Western efforts to counter China’s subsidization and oversupply strategies in strategic industries.
4. China’s retaliation goes well beyond canola to target multiple Canadian agricultural sectors: The tariffs now cover canola products, seafood, pork, and, most recently, canola seed, representing a broad assault on Canadian agricultural exports worth billions of dollars.
5. The conflict represents a defining moment in the emerging Cold War between the U.S. and China: Countries worldwide, including Canada, are being pressed to choose sides in what amounts to a generational geopolitical realignment between democratic and authoritarian government systems.
China is using economic coercion to pressure Canada ahead of its EV tariff review
The timing of China’s latest tariff escalation appears deliberately calculated to maximize pressure on Canadian policymakers. “What China has done now, about [two months] ahead of our one year anniversary, is they’ve doubled down, and they’ve hit us really where it hurts on the only remaining aspect of the canola trade, and that is on seed,” Hawkins explained.
This represents a significant escalation from China’s initial response, which targeted about $1 billion in Canadian canola products. The new tariffs on canola seed alone affect approximately $4 billion in trade. “They basically put in place tariffs that will kill our trade into that country, and they’ve indicated they could remove them at any time, which, of course, is some really strategic leverage, economic coercion,” Hawkins noted.
Canada has become China’s preferred target for retaliation over the United States
Despite the United States leading the charge on electric vehicle tariffs with 100 percent duties imposed in May 2024, China has chosen to focus its retaliation primarily on Canada rather than the U.S. This pattern mirrors China’s response to the 2019 Huawei executive extradition, when China imposed tariffs on Canadian canola and detained two Canadian citizens.
“What China did is they didn’t retaliate at all against the United States’ tariffs. But they did do two things on Canada and the EU—they challenged us to the WTO, which is sort of meaningless these days, but in Canada’s case, they cracked down hard with counter tariffs.” Hawkins observed. He referenced the Chinese strategic principle of deterrence: “What they did is they put very significant tariffs at the time on our canola products, obviously. And they also really began to do what is reflective of the Chinese proverb, which is: to scare the monkey, you must kill the chicken.”
The trade dispute reflects broader G7 coordination against Chinese non-market practices
Canada’s decision to impose electric vehicle tariffs on China was not made in isolation, but as part of coordinated Western efforts to address China’s trade practices, Hawkins says. The G7 nations had “come out very strongly about needing to remain coordinated and resilient against these Chinese practices” throughout 2023 and 2024.
“There have been intense conversations all along, and the EU following suit in their own modified way was entirely reflective of that,” Hawkins explained. The coordination targeted China’s “trade distorting practices such as subsidization of their industries, like injuriously intended oversupply of global markets in order to crowd out and crush certain industries deemed strategic by the Chinese, where they do not want any competition.”
China’s retaliation has expanded beyond canola to target multiple Canadian agricultural sectors
China’s response has systematically targeted Canada’s agricultural exports, expanding from the initial canola tariffs to include seafood and pork. “They slapped a 25 percent tariff on a very significant export as well into China, which is our seafood and pork industry,” Hawkins noted.
The strategy appears designed to maximize economic pain across multiple sectors. “So they took a fairly broad brush, hitting us right where it hurts in the agricultural space,” he explained. The comprehensive nature of the tariffs suggests China views agricultural exports as Canada’s primary vulnerability in the trade relationship.
The conflict represents a defining moment in the emerging Cold War between the U.S. and China
According to Hawkins, the current trade disputes reflect a broader geopolitical realignment that extends far beyond bilateral trade issues. “There is a moment that is upon us. It’s not just that it’s coming. It is here in Canada and the Western world,” he emphasized.
Countries are being forced to choose sides in what Hawkins describes as “intense geopolitical rivalry” between the legacy power of the United States and the new, perhaps even dominant power, China. This choice carries implications beyond economics, encompassing “ideological governmental systems dynamics” that clash between democracies and what Hawkins labels “repressive authoritarian communism.”
This commentary draws on a Hub podcast. It was edited using AI. Full program here.
