In a continuation of its aggressive strategy to retaliate against the trade policy of Canada, China has issued new tariffs on Canadian agricultural products and food with a value of more than $2.6 billion. The new tariffs, in place as of March 20, 2025, are a response to Canada's imposition of tariffs on Chinese electric cars, steel, and aluminum imports in late 2024. The action is seen as a further escalation in the Canada-China trade war, which has been largely dictated by U.S. trade policies during Donald Trump's presidency.
Background: Canada's Tariffs on Chinese Goods
In August 2024, the Canadian government placed a series of tariffs including a 100% tariff on Chinese electric vehicles (EVs) and a 25% duty on Chinese steel and aluminum imports. These actions were part of Canada's effort to protect indigenous industries from what it believes are unfair trade practices, including overcapacity and subsidies by China. Canada's tariffs fall in line with similar measures implemented by the United States and European Union against imports from China, especially in steel and electric car manufacturing.
These tariffs were introduced as a result of Canada's concern about the Chinese state-directed policy of over-capacity and the rising trade deficit. Prime Minister Justin Trudeau stated that these actions were necessary to address the impact of unfair Chinese trade practices, particularly in the manufacturing sector. (canada.ca)
China's Retaliation: New Tariffs on Canadian Agricultural Exports
As a reaction to these trade measures, the Federal Government of Canada has imposed the following tariffs on Canadian farm produce by China:
- 100% Duty on Rapeseed Oil and Oil Cakes: China will impose a 100% duty on Canadian rapeseed oil, oil cakes, and pea shipments worth more than $1 billion. The move is expected to adversely affect Canada's agricultural exports to China to a large extent.
- 25% Tariff on Canadian Aquatic Products and Pork: In addition to the rapeseed tariff, China is also imposing a 25% tariff on Canadian aquatic products, including fish, and pork, totaling around $1.6 billion.
The exclusion of canola (rapeseed) from this list of tariffs has led to speculation that China may be willing to negotiate. Canola is among Canada's top farm exports to China, with the two-way trade worth approximately $3.7 billion in 2023, according to the Canola Council of Canada.
Excluding canola from tariffs could suggest Beijing would like to negotiate and is leaving the door open for de-escalating tensions in the trade war. (reuters.com)
China's Retaliatory Tariffs Geopolitical Implications
The move to impose these retaliatory tariffs occurs at a time that analysts have taken to mean as China disapproval of Canadian trade policy. By taking action now, China is reminding Canada what it costs to be too closely tied to U.S. trade policy, particularly since the Trump administration has already imposed high tariffs on Canadian goods in the past. Others point out that China's response is also a reminder of the overall tensions in global trade relationships and growing power struggles among China, the U.S., and Canada. (ft.com)
The tariffs occur at a precarious time in global trade. With ongoing fears regarding trade deficits and national security issues, particularly in the electric vehicle industry, the global market has been on edge. The consequences of these tariffs could bleed into beyond the two countries and extend to have an effect on larger trade negotiations among the U.S., Canada, and China.
The Effect of China's Retaliation Tariffs on Canadian Industries
These new levies will definitely hit Canadian industries with a high export dependence on China, most notably the agriculture and food industries. In 2024, China remained Canada's second-largest trading partner after the United States. The last few years have seen China purchase a range of agricultural products in Canada including pork, peas, canola, and aquatic products. In 2024, they were valued at about $47 billion.
The tariffs could lead to a reduction in the income of Canadian farmers and enterprises that rely on exportation to the Chinese market. The agricultural sector is most vulnerable, with canola being among the biggest Canadian canola exports to China. More than half of Canada's canola exports are to China, and the industry is now facing serious uncertainty following China's probe of anti-dumping allegations in 2023. (canolacouncil.org)
The exclusion of canola from the tariffs in the new round might also be a hint that China is willing to keep the door open for further negotiations. However, experts say that in case of no resolution, it can cause irreparable damage to the Canadian economy. (reuters.com)
Looking Ahead: Can Trade Relations Be Salvaged?
The Canada-China relationship remains complicated, particularly with the two countries attempting to guard their economic interests on the world stage. Canadian Prime Minister Justin Trudeau has already shown concerns about China's state-led excess capacity in steel and aluminum sectors. There is hope, however, that tensions would push diplomatic talks into ending the conflict.
China, one of the largest purchasers of farm goods, could relax its tariffs because of changing political circumstances in Canada. Canada's federal election must be held by October 20, 2025, and some analysts view a change of leadership as an opportunity to reboot the bilateral relationship, as happened with China and Australia. (apnews.com)
Conclusion: The Road Ahead for Canada-China Trade Relations
The recent tit-for-tat tariffs by China on Canadian agricultural exports are a direct manifestation of the growing tension between the two countries. As the nature of international trade keeps evolving, businesses, governments, and sectors must walk a fine line around the pitfalls of such evolving trade policies. With possibilities of future negotiations, Canada and China will have to resolve their economic interests in a manner that reduces the risk of a full-scale trade war.
Key Terms to Follow:
- China Canada trade war
- Canada-China tariffs
- Canadian agricultural exports
- China retaliatory tariffs
- U.S. trade policies
- Electric vehicle tariffs
- Canola exports to China
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