THE HIGH PRICE OF CHEAP — PART ONE
CHINA DIDN'T CHANGE. CANADA DID.
From Canada's biggest geopolitical threat to a strategic partner — in less than a year.
During the 2025 federal election campaign, Mark Carney was asked to identify Canada's biggest security threat.
His answer was blunt:
CHINA.
He later described China as Canada's biggest threat “from a geopolitical sense,” pointing to foreign interference, its relationship with Russia and wider security concerns.
Carney also warned that China did not share Canada's values when it came to trade and said Canada needed to be very careful about expanding commercial ties.
Nine months later, the language had changed dramatically.
On January 16, 2026, Prime Minister Carney stood in Beijing announcing a new strategic partnership with China.
SO WHAT CHANGED?
CANADA HAD ALREADY SOUNDED THE ALARM
In August 2024, Canada imposed a 100% surtax on Chinese-made electric vehicles, on top of the normal 6.1% tariff.
Ottawa said Chinese manufacturers benefited from:
Unfair non-market policies;
weaker labour and environmental standards;
and an “intentional, state-directed policy of overcapacity.”
The government warned that Chinese competition threatened Canadian workers, Canadian manufacturers and Canada's long-term prosperity.
Ottawa also warned that connected vehicles containing technology from China could pose significant risks to Canadians' privacy, data and national security.
Those were serious concerns.
Serious enough to justify a 100% surtax.
Then Canada reversed course.
THE DOOR REOPENS
Under the new Carney agreement, Canada will allow an initial 49,000 China-made EVs annually at the normal 6.1% tariff.
Ottawa says Canadians will benefit from cheaper vehicles.
China agreed to sharply reduce tariffs affecting Canadian canola and ease restrictions on several other Canadian agricultural and seafood exports.
The government also hopes the arrangement will eventually lead to Chinese investment and joint ventures in Canada's automotive sector.
It was clearly a trade bargain.
But none of that answers the central question.
WHAT HAPPENED TO THE RISKS CANADA IDENTIFIED IN 2024?
Did China's state-supported industrial system disappear?
No.
Did its massive EV overcapacity disappear?
No case has been made that it did.
Did Canada's concerns about foreign interference and cyber espionage disappear?
No.
Canada's own security agencies continue to identify China as a major source of espionage, foreign interference and cyber threats.
China didn't fundamentally change.
Canada's policy did.
THEN THE U.S. RELATIONSHIP CHANGED
There is another important piece to the puzzle.
Between Canada's 2024 decision to restrict Chinese EVs and the 2026 reversal, Canada's relationship with its largest trading partner deteriorated sharply.
The United States imposed tariffs on Canadian industries.
Canada retaliated.
Trade negotiations became increasingly hostile.
And the Carney government made reducing Canada's dependence on the American market a central objective.
China suddenly offered something Ottawa badly wanted:
ANOTHER MAJOR MARKET.
That may explain part of Canada's change in direction.
But it raises another question.
DID CHINA BECOME LESS OF A THREAT — OR DID THE UNITED STATES BECOME LESS ATTRACTIVE?
Those are very different things.
The worsening relationship with Washington may have changed Canada's calculation.
It did not necessarily change China's behaviour.
AND THE U.S. CLEARLY NOTICED
Canada's decision also runs directly against American policy toward Chinese connected vehicles.
Washington has moved to restrict Chinese automotive connectivity hardware and software over national-security concerns.
American officials openly criticized Canada's decision to admit Chinese EVs.
That matters because Canada's auto industry is not remotely independent of the United States.
More than 90% of Canadian-made vehicles are exported south of the border.
Canada is therefore trying to diversify away from the very country upon which the survival of much of its automotive manufacturing presently depends.
That is not necessarily wrong.
But it is a significant gamble.
PERHAPS THE REAL CHANGE WAS CANADA'S CALCULATION
Ottawa now sees several potential benefits:
Agricultural access to China.
Cheaper vehicles for Canadian consumers.
Trade diversification.
Potential Chinese investment.
Less dependence on the United States.
All of those have economic value.
But there is another set of numbers worth considering before deciding which relationship Canada should be trying to reduce.
BUT CONSIDER THE TRADE BALANCE
Canada certainly has reason to find new customers. Heavy dependence on any single market carries risk.
But in 2025, Canada exported about $565 billion in merchandise to the United States while importing about $362 billion — leaving Canada with a merchandise trade surplus of roughly $203 billion.
With China, the picture was almost the reverse.
Canada exported only about $34 billion in merchandise to China while importing approximately $91 billion — leaving Canada with a trade deficit of roughly $56 billion.
Put another way, Canada buys roughly $2.60 from China for every dollar of merchandise we sell there.
Canada also exported roughly 16 times as much merchandise to the United States as it did to China.
Diversifying Canada's customers makes sense.
But there is an important difference between finding additional customers for Canadian products and opening Canada more widely to imports from a country with which we already run a substantial trade deficit.
ARE WE DIVERSIFYING CANADIAN EXPORTS — OR DIVERSIFYING THE COUNTRIES FROM WHICH CANADIANS IMPORT?
That distinction matters.
Canada identified very serious concerns about China only two years ago:
Unfair state-supported competition.
Threats to Canadian manufacturing.
Cybersecurity concerns.
Privacy concerns.
National-security concerns.
Those risks did not simply vanish.
Which leaves Canadians entitled to ask:
What new safeguards were put in place?
What new security assessment changed Ottawa's mind?
What changed about China's industrial subsidies?
What changed about Chinese foreign interference?
What changed about the cyber threat?
And perhaps most importantly:
WHAT DID CANADA DECIDE IT WAS NOW WILLING TO RISK IN RETURN FOR BETTER ACCESS TO CHINA?
FROM THREAT TO STRATEGIC PARTNER
There is nothing unusual about countries trading with nations they do not completely trust.
But describing China as a strategic partner less than a year after describing it as Canada's greatest geopolitical security threat deserves explanation.
Especially when the policy reversal involves an industry as important as automobiles.
This isn't simply about whether Canadians can buy a cheaper EV.
It touches:
Canadian manufacturing.
Canadian jobs.
National security.
Our relationship with the United States.
Our future industrial capacity.
The question therefore remains very simple:
IF CHINA DIDN'T CHANGE — WHY DID CANADA?
NEXT: WHAT DID CANADA GET — AND WHAT DID CANADA PUT AT RISK?
Canada gained agricultural concessions, cheaper imported EVs and the prospect of Chinese investment.
But it may also have placed something very valuable on the table:
Canada's relationship with its most important customer — and the future of its own auto industry.
SOURCES
Reuters — Carney identifies China as Canada's biggest geopolitical threat
Prime Minister of Canada — Canada-China Strategic Partnership
Department of Finance Canada — 2024 Chinese EV surtax and rationale
Canadian Centre for Cyber Security — National Cyber Threat Assessment
CSIS — Public Report 2025
Global Affairs Canada — Canada's 2025 merchandise trade statistics
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