Prime Minister Mark Carney receives flowers upon his arrival at Beijing Capital International Airport on Wednesday.Carlos Osorio/Reuters
Drew Fagan is a professor at the University of Toronto and a visiting professor at Yale University.
U.S. President Donald Trump began his second term almost exactly one year ago and what does Canada have to show for it? We’ve endured pointed jokes about annexation, fitful negotiations over unjustified tariffs and the President’s dismissal this week of the United States-Mexico-Canada Agreement as “irrelevant,” just months before the formal review of the pact is slated to start.
Meanwhile, Prime Minister Mark Carney has done his best to keep Canada-U.S. ties on something of an even keel, in the hope that American politics and the self-interest of U.S. businesses will save us from Mr. Trump’s predations. Mr. Carney has bitten his tongue such that even well-placed Liberal supporters think he needs to “get out there” and rally the country.
But actions speak louder than words. Mr. Carney’s meetings in Beijing present an opportunity to throw a counterpunch at Mr. Trump, using the President’s pet product: cars.
Autos and auto parts are the original bilateral sector, dating back to not long after cars were invented. When experts characterize the depth of the Canada-U.S. relationship by saying the two countries don’t trade things so much as make them together, they mean cars, first and foremost. This hasn’t stopped Mr. Trump from repeatedly claiming that Canada’s role in all of this amounts to “runaway” production that shall be moved to the United States.
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Enter China. Canada and the United States are sealed tight against low-priced Chinese electric vehicles with 100-per-cent tariffs. Canada followed in the lead of the U.S. in 2024. China responded with tariffs on Canadian agricultural products, such as canola, of up to 100 per cent.
But what if Ottawa let a Chinese EV company jump the tariff by setting up production here, in return for tariff concessions by China? The first part would make Ontario Premier Doug Ford happy on behalf of his province’s suppliers and workers. The second part would make Western premiers such as Saskatchewan’s Scott Moe happy, given the resulting benefit to farmers.
Of course, feasibility depends on details. Chinese EVs are inexpensive because they’re made en masse by low-paid workers. An Ontario plant, with Ontario-level wages boosting the sticker price, would be intended to supply the Canadian market alone, limiting economies of scale and domestic supply opportunities alike.
A limited EV foothold in Canada likely wouldn’t elicit all-encompassing tariff concessions from Beijing. But China might go easy given the chance to put one over on Mr. Trump.
And the President’s reaction? It would hardly be positive to Canada or China. It might stir things up too much. It might be risky. But it might show Mr. Trump that Canada has cards to play too.
This kind of deal would be both very old and very new. It would be a return to the era when branch plants met Canadian demand, and it also would be an example of the new mercantilism in which foreign investment gets translated into sales, based primarily on political negotiations and not market forces.
Before the 1965 Canada-U.S. auto pact, border tariffs meant that Big Three branch plants mostly made cars in Canada for the Canadian market, and cars in U.S. plants for Americans. The auto pact removed those tariffs, and both countries came to make cars for the North American market.
Canada got special treatment under the agreement. The Canadian industry was uncompetitive, so Ottawa got a production guarantee related to sales. It wasn’t needed for long. Canadian auto production thrived for decades, as far more cars were made here than sold here. This eroded over time because of competition in the Southern U.S and in Mexico, but autos and auto parts remain Canada’s second-biggest export after energy.
Canada’s immediate challenge is clear enough given Mr. Trump’s demand that the Big Three leave Canada. Mr. Trump’s challenge is longer-term: Autos are a sunsetting industry in developed countries. But he cares little about that.
Canada needs a trade deal with the U.S. that we can live with, letting us refocus on the even harder tasks of building the domestic economy and expanding trade globally. Mr. Trump refuses to accept that Canada has anything to offer. An EV deal with China can only work on its own terms. But it might also make Mr. Trump pay more attention to the world as it is.