2 days ago
Canada has an opportunity to reset our relationship with China – and, in a rare twist, on our terms
L. Philippe Rheault is a lawyer and former Canadian diplomat, and the director of the University of Alberta's China Institute, Canada's largest research and policy institute dedicated to China issues.
Canada finds itself in a particularly vulnerable position on the world stage. It is more reliant than most countries on international trade for its prosperity – and a large share of that trade, not to mention its security arrangements, is tied to an increasingly unreliable United States, led by a President who seems intent on upending the postwar international order.
But it is not the only country reeling from the recent episodes of trade-policy vaudeville emanating from Washington. China is another. Despite putting on a brave face and having made herculean efforts in recent years to reduce commercial reliance on the U.S., China remains severely buffeted by U.S. trade actions. This comes as China's economy already faces lingering headwinds: weak consumer demand, a property slump, overreliance on investment and exports, and the difficulty of pursuing deeper structural reforms. Given all of these challenges, U.S. uncertainty and higher tariffs on manufacturing and exports represent an added strain that Beijing would rather avoid. Its three-month relative tariff truce with Washington belies the continued underlying tensions and protracted challenges China anticipates in its relationship with America going forward.
Predictably, China has responded to U.S. actions by seeking to deepen trade ties elsewhere. Already the world's largest trading nation – and the largest trading partner for most countries, including much of Latin America – it has many places to turn to as it works to continue diversifying its trade portfolio.
But China's courting of other countries is not only defensive. Beijing also sees opportunity in Washington's current 'everywhere-all-at-once' approach to trade and foreign policy. Whatever one may think of Donald Trump's methods, one thing that does appear certain is that he is serving as a historical accelerant: compelling almost every country, often reluctantly, to reassess its relationship with America and urgently consider new arrangements as a hedge against continued U.S. unpredictability.
Aware of this trend, China's diplomats have adopted – somewhat awkwardly but nonetheless emphatically – a more mellifluous tone, working to pull erstwhile U.S. allies and partners further from Washington's orbit. The tone and approach vary by country and circumstance, but recent pronouncements by China's ambassador to Canada, Wang Di, leave little doubt that he too has received similar instructions.
Therein lies the opportunity for Canada. We are currently witnessing a moment in time in which China is more willing to engage with Canada than Canada is with it – a divergence from the normal pattern of recent decades. With much scar tissue left to heal from the saga involving Huawei CFO Meng Wanzhou and the detention of Canadians Michael Kovrig and Michael Spavor, as well as concerns about foreign interference and persistent bilateral irritants such as trade restrictions on canola, Canadians and their government are now viewing China with a more exacting vigilance. For many Canadians, taking a second look at China would likely not be a particularly enticing priority in the absence of recent provocation from Washington.
The Decibel podcast: How Canadian businesses are getting caught up in U.S. tariffs on China
But that is precisely why China's overtures should be seized upon by Canada as an opportunity to examine gradual re-engagement, on terms that reflect Canadian interests, objectives and potential vulnerabilities.
Laying out a comprehensive approach grounded in such principles will require serious and previously neglected domestic homework on the part of the new Carney government – clearly articulating proposed areas of engagement that enhance Canadian prosperity, increase diplomatic leverage by aligning exports to areas of critical Chinese need, and help build Canadian resilience and optionality vis-à-vis the U.S. This would signal a clear departure from the 'engagement for engagement's sake' posture of yesteryear, and could form the guiding axiom of Canadian policy toward China going forward. In line with this thinking, two areas that emerge as clear priority sectors for immediate attention already stand out: energy and agri-food.
As a country with critical demand, security and diversification concerns of its own, China will be receptive to proposals for deepened relationships in these areas. Just one year into the expanded Trans Mountain pipeline's operations – and in defiance of many expert predictions – data show China emerging as an avid customer for Canadian energy that reaches Pacific tidewater, willing to pay a significant premium over what the same energy currently fetches in the United States. Similarly, Beijing's strong interest in the soon-to-launch LNG Canada project in Kitimat, B.C., further underscores its desire to diversify and bolster Chinese energy security. The strategic value of this development should not be underestimated: expanded Canadian energy exports could significantly enhance Canada's leverage in the bilateral relationship, potentially allowing us to avoid – or more effectively resolve – future disputes. As a major added benefit, increased diplomatic relevance through energy trade would extend beyond China to Canada's broader network of relationships across the Indo-Pacific. This increased influence should be a central consideration as Canada revisits both the economic and strategic rationale for developing new pipeline and export infrastructure.
As the U.S. trade war escalates, LNG Canada is poised to start exports to Asia
When it comes to agri-food, despite Beijing's tendency in recent years to target canola or seafood in retaliatory trade actions – or, perhaps more aptly, because of this tendency – Canada should move to seek structured engagement. This could take the form of sectoral trade talks that aim to provide a more predictable framework for agricultural trade. By no means would this make Canada bulletproof against all risk of future coercion or retaliation, but successful negotiations would nevertheless provide an important extra layer of predictability and security to one of Canada's largest and most profitable exports. Given the critical importance of food security to China, we may be surprised how receptive Beijing could be to a potential framework deal with Canada – one that would help diversify its supply base and foster a more predictable relationship with a reliable partner.
Myriad other areas will also merit careful attention, such as establishing a clearer investment regime around foreign direct investment, to name only one issue. Clearer guidance would help ensure that sensitive sectors remain off-limits, but that capital aligned with Canada's needs is not deterred by regulatory ambiguity. Likewise, emerging opportunities in critical minerals, green technology and Canadian services exports – where Canadian capabilities and Chinese demand or interests potentially intersect – should not be overlooked.
To be clear, this is not a panda-hugging exercise. None of the above precludes working with like-minded partners to strengthen the rules-based international order or, to the extent possible, existing multilateral institutions. Nor does it obviate the need to remain vigilant and push back against egregious Chinese conduct. But the point bears emphasizing: Canada's increased relevance as an important supplier of things China critically needs will enhance its diplomatic standing and traction not just with Beijing, but across diplomatic channels more broadly – providing a welcome fillip to the government's continuing Indo-Pacific strategy.
As it moves ahead with this approach, Ottawa will also need to remain acutely aware of how its actions are perceived in Washington. Despite Mr. Trump's continued truculence, the United States remains our primary security partner and top export market – a destination for 20 times more exports than No. 2 customer China – and so almost every major Canadian foreign policy move in these volatile times must include a U.S. calculus. But while Mr. Trump has included several China hawks in his administration, he appears to be more transactional than ideological; his reprieve on Chinese tariffs, among other actions, suggest that he may not be aiming for a full decoupling from China. Canada, therefore, must also prepare for the possibility of a sudden U.S.-China deal that would pay little heed to Canadian interests – leaving Canada adrift between the Scylla of American unpredictability and the Charybdis of Chinese detachment, with few safe harbours in sight.
This is not the first time Canada has looked to China to diversify from U.S. overdependence. As recently as 2017, the Trudeau government explored free trade talks with China as a potential hedge during Mr. Trump's first term. The difference eight years later is that Beijing is eager, while Canada now has an opportunity to consider re-engagement on its own, principled terms, focused on Canada's prosperity, resilience, optionality and enhanced diplomatic relevance.
Canada faces generational geopolitical challenges, and diplomacy alone will not be a panacea. But a new approach may have the potential to transform some challenges into opportunities, leaving Canada on firmer ground as it responds to continued global change.
