BRYAN GEE/THE GLOBE AND MAIL
Julian Karaguesian is an economic and policy expert and former special adviser to the Department of Finance Canada and a visiting lecturer in the department of economics at McGill University.
Robin Shaban is a partner at 2R Strategy and a fellow of the Public Policy Forum.
Canada’s “deal” with the U.S. to drop the digital services tax, which benefits U.S. tech giants such as Meta Platforms Inc. and Netflix Inc. at the expense of Canadian fiscal sovereignty, and the Trump administration’s latest threat of a 35-per-cent tariff on Canadian goods perfectly encapsulate our current predicament: Washington no longer views Canada as an ally, but rather as a subordinate from which to extract concessions. It’s a stark reminder that trade diversification is no longer optional – it’s an urgent national imperative.
The rub is that our long-standing subordination to the U.S. is also holding us back from partnering with China, one of the world’s most important economies. To achieve economic sovereignty, Canada must break free from the made-in-Washington narrative that China is an unreliable trading partner bent on world domination. Instead, Canada must forge its own relationship with China – a relationship anchored in Canadian, not U.S., interests.
As the largest economy in the world on a purchasing power parity basis, China is set to be a core driver of future global economic growth. It also now accounts for a third of the world’s manufacturing output, more than all the G7 countries plus South Korea and Mexico combined. And not just low-cost manufacturing, but rather advanced production and world-beating technology. China leads in 37 of 44 critical technologies, from AI to green energy.
Analysis: Trump tariff threat piles pressure on Canada to expand trade with Asia
If Ottawa is serious about building a strong, independent economy, we must build a more reliable political relationship with China that supports access to its growing markets and tech hubs. With Canada in the throes of a productivity crisis, Canadian businesses need to be adopting and implementing leading technologies from around the world, including from China. Yet our federal government remains trapped in strategic paralysis, clinging to an Atlanticist-G7 world view while our largest trading partner and “closest ally” treats us with contempt.
Ottawa’s acquiescence to Washington when it comes to Chinese technology creates self-inflicted economic wounds that are only getting worse. From the Huawei 5G ban to the Meng Wanzhou extradition case, Ottawa’s compliance with U.S. demands has alienated Canada from China and brought retaliatory measures in diplomacy and trade. The 100-per-cent tariffs that Ottawa imposed on Chinese electric vehicles on Oct. 1, 2024 – mirroring the Biden administration’s tariff and announced later the same day – eventually triggered retaliation against Canadian canola and pork, costing (mostly) Western farmers nearly $1-billion annually.
The irony? While Canada enforces Washington’s decoupling-from-China agenda, the U.S. quietly re-establishes its own commercial ties with China. Even as Washington pressures allies to shun Beijing, it is finalizing a bilateral agreement with China. Canada and other “allies” are enforcing rules that the rule-maker is ignoring.
On top of that, our government officials alienate China (and India) with lectures on values and the absence of like-mindedness, which restricts both sides’ political ability and willingness to expand economic relations. Yes, Canada’s pluralistic system differs greatly from China’s single-party system. But Canada trades with other countries with significantly different political systems.
Opinion: For all the importance of G7, Canada’s fortunes truly lie with China and India
Japan’s ruling Liberal Democratic Party has been in power almost continuously since 1955, and yet no one questions our economic relationship with Japan because of “different values.” Our Minister of AI is seeking investment from the Kingdom of Saudi Arabia to expand our AI infrastructure. And while the U.S. has a pluralistic political system similar to ours, its democratic institutions have eroded significantly. Yet we generally do not question our bilateral relationship with the U.S. on this basis.
To achieve economic independence, Canada must pivot. Between 2018-19 and the end of 2023, Mexico-China trade grew 66 per cent while maintaining U.S. ties. Why can’t we? We also need to improve technology transfer from China in ways that increase our economic strength, expedite our innovation and protect our sovereignty.
The greatest threat to Canadian sovereignty isn’t Chinese interference, it’s our servility to a U.S. that increasingly treats us as a vassal. When 95 per cent of global consumers live outside America, the fact that we rely on one increasingly unreliable partner for 75 per cent of our exports isn’t strategy, it’s strategic malpractice.
Prime Minister Mark Carney now faces a defining choice: double down on that Atlanticist world view or embrace what Columbia University professor Jeffrey Sachs calls the “reality of the new multipolar world.” The relentless attack on Canadian prosperity and sovereignty over the past six months should make the choice obvious.