China’s imposition of a 75.8 percent tariff on Canadian canola is just the latest in the trade war between the two countries. Canada-ASEAN Business Council advisor Bill Hawkins joins Hub Hits to discuss China’s aggressive tariff attacks against Canada and how the superpower is emboldened by the U.S.-Canada trade disputes.
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Program Transcript
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SEAN SPEER: Are China’s tariffs on Canadian canola exports really about the United States? I’m glad to be speaking today with Bill Hawkins, the Head of Trade and Investment at Sussex Strategy Group and head of a market diversification consultancy called growth bridge, to answer precisely that question. Bill, thanks so much for joining me.
BILL HAWKINS: Sean, great to be here.
SEAN SPEER: Bill, when I think of trade, I think of you. You’re someone who’s spent time in the private sector thinking about market access issues, and of course, is a former chief of staff to Canada’s International Trade Minister, where you were intimately involved in trade negotiations, including, amongst others, the Canadian the. Canada EU, free trade agreement, I thought of no one better to speak to at a moment when trade issues are looming large over Canada’s economy and indeed our politics. Let’s start with the big announcement out of China that it’s slapping massive tariffs, once again, on Canadian and canola exports. How should we understand it, and how does it interact with some of these bigger questions with regards to the Canada’s relationship with the United States?
BILL HAWKINS: Yeah, well, lots to unpack here, and yes, it absolutely goes to the positioning choices that Canada has to make with respect to how it geopolitically aligns in this dramatically changed world that we’re facing. So as you said a moment ago, it’s once again in position by the Chinese of tariffs on our canola trade. We saw this movie back in 2019 when Canada, at the behest of the United States, extradited the Huawei executive to into the justice system in the United States. And among the things that China did, in addition to taking hostage to have our citizens, is it imposed tariffs on our on our canola, and it removed those tariffs in 2022 when the whole issue was resolved. But they have done it again, and they have done it again as a result of Canada’s alignment, which began under the Biden administration in the summer of 2024 when the Biden administration was quite worried about China’s non market practices and as they were affecting the development of the EV supply chain, so the Biden administration in September led with some pretty stiff tariffs, 100% on EVs and some smaller tariffs on some other related items, including semiconductors. Canada followed suit about 30 days later, as did the EU. Canada followed suit pretty well identically, 100% tariffs on EVs and also hybrids, 25% as well on steel and aluminium. The EU sort of followed suit. They put in place about 37 38% tariffs on Chinese EVs, so there was already a bit of dilution there. But Canada strongly followed suit.
What China did is they didn’t retaliate at all against the United States is 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. And what they did is they put very significant tariffs at the time, on our 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, right? Which is Chinese way of saying, in order to deter others from taking action, you’ve really got to crack down on the best victim to choose. So they really chose Canada for a couple of reasons, which we can get into, which get into our geostrategic choices as a country.
So once we followed suit, China hit us hard, and what they’ve now done is, in addition to imposing counter tariffs on our canola of 100% they also slapped a 25% tariff on a very significant export as well into China, which is our seafood and pork industry. So they took a fairly broad brush, hitting us right where it hurts in the agricultural space, and what they’ve now done, Canada had announced when we followed suit in the fall of last year with the EV tariffs, following suit with the United States, Canada announced that within one year we would review those tariffs. And what China has done now, about a month 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. So that is about a $4 billion trade for Canada, as opposed to the initial counter tariffs, which China put in place, which covers about a billion dollars. So they’ve really taken it to the max now. 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, in advance of our decision this fall as to what we’re going to do with respect to continuation or not of our EV tariffs. So that is really the situation we’re facing.
SEAN SPEER: Yeah, there’s a lot, a lot there, precisely the kind of comprehension. Of answer that I that I hope from you, and we’ll pursue some of those lines of analysis before we wrap up. But I want to, I want to come to your point about Canada’s decision to match the US on EV tariffs. Bring us behind the curtain a bit. You’re someone who spent a long time as a chief advisor to an international trade minister, what would have gone into that decision? To what extent would there have been direct collaboration or coordination with the US administration, like if you were advising the minister at the time, what would have what would have you considered, and perhaps even Bill, what did you, what would have you advised?
BILL HAWKINS: Well, an important element of context to understand is that through the course of 2023 and 2024 including, significantly at the G7 in 2024 all of those nations really came out hard against China’s non market practices. So subsidisation, trade distorting practices like subsidisation 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. And not only is it in EVs, but it is also in critical minerals which is an important input into, among other things, EVs, but also their defence industry, and they now effectively control that sector. So the g7 through 24 had come out very strongly about needing to remain coordinated and resilient against these Chinese practices. So it really, yes, there was a heck of a lot of coordination. And it wasn’t merely us calling us one day and saying, Hey, we think we’re going to do this. There have been intense conversations all along, and the US, pardon me, the EU following suit in their own modified way was entirely reflective of that.
SEAN SPEER: Go ahead.
BILL HAWKINS: Pardon me, I was simply going to say and that really underscores one of the primary questions for us now, in this changed world, ever since Donald Trump has gotten reelected, 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, and in fact, many other parts of the world, including the Southeast Asian nations, all are being pressed by the United States to effectively pick a side, pick a side, generationally, with respect to whose economy in this modern, effectively Cold War period that we’re entering were intense geopolitical rivalry between the legacy power of the United States and the rising and in their view, seem to be dominant power China. How is it that other economies are going to interact with that system, and of course, it carries all of the ideological governmental systems dynamics, right? It’s the black versus white, democracy versus repressive authoritarian communism. Yes, pursuing Chinese capitalists with Chinese capitalism, with Chinese principles and characteristics, but it is economically coercive and anti freedom in every single respect you can point to, technologically enabled in a really frightening way. And we are at the point, in fact, we’re past the starting point, and we’re definitely into the first phases of the world reordering and resorting into the two different fundamental camps.
SEAN SPEER: I’ll come to that in a moment, because, of course, that is the big issue looming over all of these questions. But I will say, Bill, let me put something to you and then and then have you respond. I, I was not instinctively supportive of the Canadian decision to impose tariffs on Chinese EVs, or at least I, I had some doubts for the following reason, it’s self-evident to me that there are certain goods and technologies that we shouldn’t be importing from China, think semiconductors or wireless technology or whatever. On the other end of the spectrum, there are things for which I don’t think we have a national interest stake, like T shirts or or whatever. And then, of course, there’s this, like vast range of goods, somewhere in between. And I’m open to being persuaded otherwise, but it seems to me, EVs are closer to T shirts than they are wireless technology. But even if they’re not, at some fundamental level, you get the sense that Canadian policy makers are making these judgments without a framework, without a way to think about them strategically. How would you respond to that?
BILL HAWKINS: Yeah, well, you put your finger on something that is a uniquely Canadian fault line. I. And that is the rivalry. I don’t know if they’d ever characterise it that way, but what is effectively a rivalry or competition between industries in Canada, auto versus, in this case, AG, West versus central Canada. And that’s a dynamic the Chinese are acutely aware of, and they know it is a real pain point. But on your on your more technical fundamental question, again, the context is, is that the g7 really began to focus on the distortive trade practices of the Chinese that were paralleled by highly repressive and not only economically unfair but unjustifiable labour practices and environmental practices. So on all three of those fronts, environment, labour, trade and the associated economic distortions and the negative effects that all of those combined were having on industries that are fundamental to the Western economy and the North American economy, that is the justification, and that is the analytical lens that led the Western world, led by the America under Joe Biden, to begin this initiative, which, of course, has just been ramped up and torque by the US under Donald Trump.
SEAN SPEER: So now you’ve set out this increasingly balkanized world where we essentially see two camps emerging and an insistence, on the part of the Trump administration that countries need to decide which camp they’re in. They can’t be in both camps. They need to be all in one way or the other. And the price of membership, by the way, can is pretty high. This isn’t the idealistic and magnanimous view of global economic arrangements of the past. This is a kind of hard power politics, where if you want access the US market, you need to be committing to certain amount of investment, maybe participating in the Golden Dome, maybe permitting Trump hotels in Canada, who knows, all predicate on the assumption that being part of the US camp is so self-evidently attractive that countries are going to be prepared to accept those costs. Is there a risk that the Trump administration is over overestimating the self-evident preference to be part of the US camp than the Chinese one?
BILL HAWKINS: Well, yeah, I mean that market owner of being of a highly desirable market, they are putting a lot of stake on that. And in fact, they’re really running roughshod over America’s broader foreign policy interests that are usually serviced through genteel diplomacy and a real seeking of outcomes and agreements that are at least on the surface, win-win in nature, not lose in the in the manner that Donald Trump And the US administration is now pursuing economic the reordering of economic relations. However, if we take a look at how it is that the world leaders have responded in the wake of the adoption of this very aggressive approach out of the gate by the Trump administration here in Trump 2.0 in every single instance, Western leaders have towed the line and played the game, you know, often with pained expressions on their faces. They know, I mean, the EU leaders press conference with Trump announcing the EU deal was like a hostage video in many respects, but what did what did she do? She used the language and the framing by that is the United States that there are trade imbalances that need remedy, remedy that that was a negative impact on the US economy. Those arguments can be, you know, contested and debunked, but she and every other leader around the world has gone along with them. So it appears to be quite a powerful tool, but it is going to be extremely interesting to see how it is things unfold, these back of the napkin trade agreements, if you can call them, that trade deals. They’re not they’re not codified. There’s the officials are now tasked to put them together. All of the major ones that the US has done include some verbiage that is that requires the counterparty to the United States being compliant in order to continue enjoy to enjoy market access advantages to be compliant with supply chain security requirements, as defined by the United States and that Canada, as we seek our own reset of our economic and perhaps now.
Now more broad security arrangements with the United States. There is absolutely no scenario under which Canada will be required to comply with these demands, these elements, and arguably for very good reason, in order to counter what are these very pernicious, highly injurious activities that the Chinese are strategically pursuing in order to dominate in many different strategic sectors, all in well, not all, but many of which are enabled by the utilisation of critical minerals which China has now acquired a virtual monopoly on the processing of yes in the world. And they’ve got the world, in many respects, the Western world, you know, would you say by the throat? They’ve certainly begun to strategically ensure that the outcomes going forward are ones that are China friendly. And there’s an effort on the part of the West to push back on that the other countries in the world, particularly what the IMF calls connector economies, in Southeast Asia, they didn’t play much of a role in the last Cold War. You know, they were a battleground. But in terms of geostrategic diplomatic engagement, the Southeast Asian economies and the ring around, around the United States, excuse me, around Russia, they didn’t play much of a diplomatic role.
But this time around, it’s going to be different. And there is a choice in front of all of these economies as to where their fundamental alignment is going to be. And unfortunately, the manner in which the Trump administration handles the zero sum, “I win, you lose” scenario is breeding resentment. It is a bit of an Achilles heel. It’s bred resentment. And it may, in fact, significant limit what otherwise could be a robust cultivation of alliances. On for the United States is utilisation and benefit, and Canada’s along with it that may not come together because of how it is that Donald Trump and the US administration.
SEAN SPEER: In the meantime, though, what you’ve set out is that that the fact that Europe, Japan, probably Canada, and others, have ultimately come to the table in spite of the high demands from the US administration, is a sign of effectively, what the US had been leaving on the table in past rounds of bilateral and multilateral relations. But I want to take up as a penultimate question the point that you raised about the constraints that such a deal would impose on Canada and its foreign economic policy. These are the other countries in the world, again, as someone who’s worked as a chief advisor to a trade minister who’s thought about Canada’s trade relationships, including, at some level, the goal of diversification. What does it say bill that the trade off here in order to achieve ongoing market access. The US is, for all intents and purposes, the extraterritorial application of US policy constraining Canada’s ability to have an economic relationship with, say, China and others. How would you think about that trade off if you were advising the minister?
BILL HAWKINS: Well, the first thing I’d note is I really don’t want to be glib here. I don’t want to suggest this is a painless choice. This is an easy path to follow. It absolutely is not, and how we’re going to work our way through it in a way that makes it economically manageable, politically manageable. These are matters of critical import for Canada, Canola is a great example of that, where the US is our number one market, with about $7.7 billion of trade there. But the but China is very close number two, with about 5 billion. So, you know, I’m not saying overnight we should forsake the Chinese market, but we are going to have to work our way through this. And the reasons that I would suggest that Canadians and pundits and the Government of Canada and other countries as well, think about this is it’s not really, it’s not so much a matter of national sovereignty that is at stake, although that you can view it in that jaundiced way, but if you fundamentally believe in trade practices, in safeguards against trade practices that are highly distortive, highly injurious, and if they are allowed to continue, will truly decimate entire industries that, yes, have a strategic value, but even beyond that, their existence, those industries, their health, is critical for the for employment, for social stability in our economies, if you care about labour practices that are adopted the world over, if you care about environmental practices, because the Chinese pursuit of EVs is not a clean, green, sustainable pursuit. Uh, let’s not kid ourselves.
So if we care in the west and other parts of the world about these fundamental tenants, then we are pursuing this on a concerted basis, and we are sticking to our principles, and we are managing the trade offs as best we can, but knowing that there will be a price to be paid, and doing what we can our government and industry working collaboratively, including through trade diversification, which is not a holy grail or a silver bullet, but it is important to make sure that we manage those trade offs so that they the pain that we do have to endure is minimised, but to go down the path, as many in Canada seem so want to do to view everything through a, I hate Donald Trump lens or a, this is an abrogation of our sovereignty. Lens. It is ultimately, in my view, at least not the lens through it should be, should be viewed, and precisely because the very things that many of those same people profess to care about, the environment, labour, good, sustainable jobs in strategic industries. If all those things matter, as those very same people, in many cases, say they do, then that’s the justification for pursuing it with our remaining moments.
SEAN SPEER: Bill, why don’t you just paint a picture of what you think comes next. You can take that question in any way you want, maybe with respect to this renewed trade irritant with China and, of course, the ongoing negotiations with the Trump administration.
BILL HAWKINS: Yeah, right. So you know, in my day job, Canadian businesses, businesses the world over don’t have time or energy to focus on these sorts of broader geostrategic matters. They need to understand the prevailing trends and where things are going. But there’s a heck of a lot of work that the Canadian business sector has to do in order to do what it can to diversify its trade, which is a long term endeavour, and we need to understand what markets are still accessible to us. Where is it that we our value proposition has been held, perhaps has been deepened, in these dynamics that we faced over the last, you know, four or five months, and make actions, finally, in a in a very concerted way, to to reorder our economy in that respect, but the biggest, the biggest absolute game in town, this is not breaking any ground for you or your listeners, is Canada needs to get its relationship with the United States straight and settled on, it seems a basis that may be fundamentally readjusted than the One that we have had historically ever since NAFTA came into effect. So the phases through which we are going to have to reorder that relationship are there may be a short term, you know, back of the envelope napkin, deal that we may find ourselves able to do and willing to do, if the terms are right in the in the short in the immediate to short term. But the major action is with respect to what happens to the usmca cusma And of course, the July 120 26 deadline, where the review to use the terms of the agreement much more now likely to be a renegotiation of that agreement that is critical for us. If we did not have, at the present time, the protections from the tariffs, the HEPA tariffs on our and fentanyl tariffs on our economy, we did not have that protection where goods that are compliant on a Rules of Origin basis with Kuzma still traffic duty free. If that was not in place, we our economic situation would be dire. Everybody knows that, and we cannot afford to not have things straight with the United States economically as tough, as challenging as that is going to be, and it certainly will be, and it will require us to deal with someone that, for many Canadians, is a highly undesirable negotiating Counterparty. But you know, the world is the world the way the world is, and we’ve got to face it as it is.
SEAN SPEER: That’s a great way to wrap up a conversation we ran a little bit longer than I intended, but as our listeners, viewers can hear, Bill is someone who’s thought deeply about these issues. We’re grateful to be able to draw on his experience and wisdom. That’s Bill Hawkins, the Head of Trade and Investment at Sussex Strategy Group and head of a market diversification consultancy called growth bridge. Thank you so much for joining us at this episode of Hub Hits.
BILL HAWKINS: Thank you, sir.
