How Canada can properly use China as a hedge against Trump

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Stewart Beck is the executive lead for the LINC Asia program at Simon Fraser University’s Jack Austin Centre. He is the former chief executive of the Asia Pacific Foundation of Canada. In addition, he served as Canada’s high commissioner to India from 2010-2014, and earlier in his diplomatic career spent eight years in Shanghai and Taipei.

U.S. President Donald Trump has once again stopped all trade negotiations with Canada. His reason? An Ontario government TV advertising campaign that ran in the U.S., featuring archival footage of former president Ronald Reagan’s 1987 warning about the impact of tariffs on the American economy. In retaliation for the TV ad, Mr. Trump also raised tariffs on Canada by 10 per cent. This marks the second time in five months he has abruptly ended trade talks with Canada.

We must protect what we have in the U.S.-Mexico-Canada Agreement. The U.S. takes 75 per cent of our exports. But the recent termination makes clear that even our best diplomatic efforts can’t protect us. This is where hedging comes in, something a former central banker such as Prime Minister Mark Carney understands intimately. You don’t abandon your primary position, but you protect against downside risk by building alternatives.

The consequences of having no hedge continue to mount. This month, Stellantis NV announced it would shift Jeep Compass production from Brampton to Illinois, putting 3,000 Canadian jobs at risk. The company cited Mr. Trump’s tariffs as the reason. What’s our Plan B when American protectionism continues to squeeze our manufacturing base?

Take electric vehicles. While we’ve been fighting battles over steel and aluminum, what’s been more damaging is our complete disengagement from China in recent years. This began when Canadians Michael Spavor and Michael Kovrig were detained in the country for more than 1,000 days, accused of espionage, following the 2018 arrest in Vancouver of Huawei chief financial officer Meng Wanzhou on a U.S. warrant. During this standoff, China quietly captured global leadership in the technology that will define the industry’s future. Chinese companies now dominate EV batteries, control critical mineral processing and lead in manufacturing scale.

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Our response? A 100-per-cent tariff on Chinese EV imports in solidarity with Washington. What did we get for that gesture? Mr. Trump stopped trade talks over a TV ad. Stellantis will move production south. Chinese EV technology continues advancing without us, while American tariffs are driving our auto sector across the border.

Interestingly, even as Stellantis was abandoning Canada, Foreign Affairs Minister Anita Anand was in Beijing engaging with Chinese officials. Last week, she announced that Canada now views China as a “strategic partner,” she emphasized “pragmatic engagement” and invited her Chinese counterpart to visit Canada.

We should now be asking auto executives, labour leaders and provincial governments specific questions: What could we gain from strategic engagement with China? What would we risk? What are the alternatives? Instead of reflexive rejection, give stakeholders six weeks to assess concrete proposals and report back publicly.

I was in Shanghai in the late 1990s when General Motors’ first joint venture began assembling Buick Regals – the same cars built in Oshawa. The Chinese required that by year four, 40 per cent of parts be manufactured locally; within a decade, 100 per cent. Western companies complied because they wanted market access. The result? China learned our technologies, developed their capabilities and eventually leapfrogged us, albeit with government subsidies.

Now the tables have turned. China leads in EV technology, while we scramble to catch up in the field we need for our own climate-change commitments. The smart play isn’t to shut them out – it’s to learn from their playbook and apply it ourselves.

Instead of just blocking Chinese EVs, let’s negotiate like they did with us. Create joint ventures that bring Chinese EV technology to Canada, with requirements that mirror their old playbook: within three years, 40 per cent of parts must be manufactured in Canada; within five years, 60 per cent. Include batteries, electric drivetrains and advanced electronics. Most importantly, insist on technology transfer – exactly what the Chinese demanded from us.

The Chinese may want to engage because Canada is one of the largest auto markets globally. Canadian parts suppliers such as Magna have proven they can succeed internationally. Companies like it – and potentially the Brampton facility, which has been shut down since early 2024 for retooling – could get a second chance to be part of the EV revolution on home soil.

This approach extends beyond EVs. Whether it’s critical minerals, artificial intelligence or green technology, the global game is being played by countries willing to engage strategically with difficult partners instead of reflexively slamming the door.

Mr. Carney’s government understands that we need to protect our U.S. relationship – his careful diplomacy reflects that priority. But they also understand the need for hedging, as evidenced by Ms. Anand’s outreach. The question is whether we’ll move from diplomatic hedging to economic hedging – building concrete alternatives that reduce our vulnerability to a partner whose decisions can shift on a moment’s notice.

This is not pivoting toward China, nor is it pivoting away from the U.S. – it’s a pivot toward Canada.