Opportunities for China-Canada Trade Under Trump’s Tariffs

Trump’s sweeping tariffs on major trading partners and key commodities like steel and aluminum are expected to have a significant impact on global trade and supply chains. As the US is Canada’s largest trading partner, the proposed 25 percent tariff on Canadian imports could reduce demand for Canadian goods in the US. However, Canadian exporters may be able to offset the impact by expanding China-Canada trade, particularly in the agriculture and energy sectors.

Shortly after retaking office, President Donald Trump announced a series of sweeping tariffs targeting some of the US’s largest trade partners, setting in motion a period of significant uncertainty and volatility in global trade markets. Canada and China, two of Trump’s main targets, both swiftly announced countermeasures, raising the prospect of a global trade war.

With a 25 percent additional tariff looming, Canadian products risk becoming less competitive in the US market. However, as Canada navigates these shifting trade dynamics with the US, there are potential opportunities to pivot toward new markets, with China emerging as a possible alternative for some Canadian exports. 

Background: Trump’s executive actions on international trade 

Trump imposes tariffs on China, Mexico, and Canada 

On February 1, 2025, Trump signed a series of executive orders implementing an additional 25 percent tariff on Canada and Mexico and 10 percent on China, taking a direct swipe at trade with three of the US’s largest trading partners.

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The tariffs on Canada and Mexico were postponed by 30 days shortly before they took effect following negotiations with the country leaders. However, no such deal was struck with China, and the 10 percent tariff on Chinese goods took effect on February 4. In retaliation, the Canadian government imposed 25 percent tariffs on $30 billion in goods imported from the US, including a wide range of food and agricultural products, wood products, apparel and footwear, beauty products, and white goods. These tariffs were suspended after Trump paused the 25 percent tariff on Canada.

Meanwhile, China’s Customs Tariff Commission also announced retaliatory tariffs of 15 percent on US coal and liquefied natural gas (LNG), and a 10 percent tariff on US crude oil, agricultural machinery, large-displacement cars, and pickup trucks. These tariffs took effect on February 10. 

At the same time, China’s Ministry of Commerce (MOFCOM) and Customs Administration announced export controls on 25 rare earth metal items, citing the need to “safeguard national security and interests and fulfill international obligations such as non-proliferation.” 

The items subject to export controls include various derivations of tungsten, tellurium, bismuth, and molybdenum, critical materials for industries such as electronics, aerospace, and renewable energy. 

Trump imposes worldwide 25 percent steel and aluminum tariffs 

On February 10, Trump signed proclamations restoring the 25 percent tariff on all steel imports (the “steel proclamation”) and raising the tariff on aluminum imports from 10 to 25 percent (the “aluminum proclamation”). The tariffs will be applicable to imports from all countries and regions “without exception”, and will take effect on March 12, 2025. 

Trump first imposed tariffs on imports of steel and aluminum in 2018 following the release of the Section 232 Investigation, which found that steel and aluminum products were arriving in the US “in such quantities and under such circumstances as to threaten to impair the national security” of the country.

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According to the steel proclamation, the 25 percent tariff on steel imposed by Trump in 2018 effectively reduced the US’s reliance on imports and increased consumption of domestic supply. However, it goes on to assert that the various exemptions and alternative agreements negotiated with multiple countries and private entities during the Trump and Biden administrations have led to imported steel comprising a proportion of US consumption comparable to levels prior to the initial tariff imposition. 

Meanwhile, the aluminum proclamation asserts that “efforts by foreign producers to circumvent the [aluminum] tariff have undermined [its] purpose”, which combined with the various country exemptions, have resulted in the aluminum smelter capacity utilization rates in the domestic aluminum industry falling below the level intended to be reached by imposing the tariff. It, therefore, concludes that the 10 percent tariff on aluminum is insufficient to reach this target and “to address the threatened impairment to our national security posed by aluminum imports”. 

Additionally, the proclamations state that there is a “global excess capacity crisis” for both steel and aluminum and that increasing Chinese steel exports in recent years is “displacing production in other countries and forcing them to export greater volumes of steel articles and derivative steel articles to the United States.”

Trump announces plan to impose reciprocal tariffs on all trade partners 

On February 13, 2025, Trump signed a memorandum directing key ministers to implement a plan to impose reciprocal tariffs on all trade partners. 

The “Fair and Reciprocal Plan” will examine non-reciprocal trade relationships with all trade partners, including tariffs on US products, unfair, discriminatory, or extraterritorial taxes on US businesses, workers, and consumers (including VAT), nontariff barriers or measures, including subsidies and regulatory requirements, and policies and practices that cause exchange rates to deviate from their market value.

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Examples where the US’s trade partners do not provide reciprocal tariffs on American goods cited in a Fact Sheet include a 10 percent tariff imposed by the EU on American imported cars, while the US imposes a 2.5 percent tariff on European imported cars. Should the plan be implemented as intended, tariffs on car imports from the EU will rise to 10 percent. 

The tariffs that Trump has imposed on products such as steel and aluminum, as well as the 10 percent tariff placed on Chinese goods, would be in addition to the reciprocal tariffs. 

The broad scope of the types of duties and trade barriers targeted by the reciprocal action means further tariffs on Chinese goods could be very extensive. The US has in the past accused China of unfairly subsidizing the production of various goods the detriment of its domestic industries., and China also imposes VAT on most goods and services ranging from six to 13 percent. 

In January of this year, the US Trade Representative (USTR) released the results of an investigation into China’s shipbuilding subsidies, which concluded that China’s “targeting for dominance burdens or restricts U.S. commerce by undercutting business opportunities for and investments in the U.S. maritime, logistics, and shipbuilding sectors”. The report further stated that “responsive action is appropriate”.

Trump temporarily halts de minimis exemption 

In addition to the tariffs, the EOs also announced a halt to the de minimis exemption, which exempts parcels valued below US$800 from customs inspections and tariffs when entering the US. The Trump administration has blamed small packages that fall under this threshold for the illegal import of fentanyl and precursor chemicals. 

On February 4, the US Postal Service also announced a temporary suspension of international packages from the Chinese mainland and Hong Kong but reversed this decision the following day. 

However, in an amendment to the EO, Trump deferred the end of the de minimis exemption until “adequate systems are in place to fully and expediently process and collect tariff revenue”, after its sudden implementation on February 4 caused chaos at US logistics centers and customs warehouses. According to an analyst cited by Reuters, an estimated four million packages entered the US every day in 2024 under the de minimis exemption. 

If reinstated, the suspension of the de minimis exemption would significantly impact Chinese e-commerce giants like Shein and Temu, whose business models heavily rely on exploiting this loophole by shipping low-value parcels directly from manufacturers in China to a vast customer base in the US. 

China-Canada energy trade under Trump tariffs 

Canada is a key supplier of energy to the US. According to data from the International Trade Administration (ITA), the US’s top imports from Canada in 2024 included mineral fuels, oils, and bituminous substances valued at US$124.87 billion, and nuclear reactors, boilers, and machinery at US$30.11 billion. 

Nearly all of the US’s natural gas imports originate from Canada, totaling 2.9 trillion cubic feet (approximately 60 million metric tons) in 2023, accounting for over 99 percent of total US imports. If a 25 percent tariff on Canadian goods is implemented, it would significantly increase the cost of Canadian natural gas in the US. At the same time, the Trump administration’s focus on expanding domestic LNG production could further reduce US demand for Canadian natural gas.

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China, meanwhile, remains one of the world’s largest natural gas importers, bringing in 131.69 million metric tons in 2024, according to China Customs. However, Canada’s direct natural gas exports to China have remained minimal due to limited export infrastructure. Despite this, China’s interest in Canadian LNG has been increasing, particularly as Canada develops new projects to increase export capacity along its west coast. 

One such project is LNG Canada, a joint venture between Shell, PetroChina, PETRONAS, Mitsubishi Corporation, and KOGAS. Located in Kitimat, British Columbia, the facility is expected to begin LNG shipments in mid-2025, marking the start of Canada’s first large-scale LNG exports. In addition, China’s state-owned enterprise Sinopec is reportedly seeking to acquire a stake in Cedar LNG, another Kitimat-based project led by Pembina Pipeline Corp and the Haisla First Nation. Expected to commence production in 2028, Cedar LNG will have an estimated output of 0.4 billion cubic feet per day, further enhancing Canada’s ability to supply Asian markets.1 

Canada’s west coast projects offer shorter shipping distances to China. According to Canada Energy Regulator, LNG shipments from Canada to Asia take approximately 10 shipping days, while shipments from the US Gulf Coast, which must pass through the Panama Canal, take around 20 days. Expanding LNG trade with Canada also allows China to diversify its energy suppliers, thereby improving energy security. 

With potential US tariffs making Canadian natural gas less competitive in the American market, China represents a major alternative market. As Canada’s LNG export capacity grows, strengthened energy ties between the two nations could lead to a long-term, mutually beneficial trade partnership. 

China-Canada agricultural trade under Trump tariffs 

Agriculture is set to become a crucial part of a potential trade war under Trump. Canada’s countermeasures to Trump’s initial 25 percent additional tariff targeted a wide range of agricultural and livestock goods – squarely aimed at the red states that are home to his voter base. Agricultural products also became a central focus of the trade negotiations between the US and China following the first trade war. In 2019, a two-phase trade deal designed to resolve some of the tensions stemming from the trade war required China to buy US$32 billion of American agricultural goods over a two-year period.

Canada is the second-largest source of US agriculture and livestock imports after Mexico, with total imports reaching US$12.94 billion in 2024. Top agricultural imports include canola, wheat, pork, and seafood. Canada is also a major supplier of animal feed, processed food products, and specialty crops to the US market. 

If a 25 percent tariff on Canadian goods is implemented, it would significantly increase the cost of Canadian agricultural exports to the US. This could disrupt trade flows, reduce demand from American buyers, and create financial pressure on Canadian farmers. At the same time, the Trump administration’s focus on promoting domestic agriculture and reshoring food production could lead to further market access restrictions for Canadian producers.

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China, meanwhile, remains one of the world’s largest importers of agricultural products, with total agricultural imports valued at US$215.16 billion in 2024. Last year, China imported 105 million metric tons of soybeans, 11.18 million metric tons of wheat, and 1.88 million metric tons of rapeseed (canola) and mustard seed oil, according to China Customs. China also imports large quantities of meat and dairy products, including 2.87 million tons of beef and 2.62 million tons of dairy products in 2024.  

Although Canada exports some agricultural goods to China, its share remains relatively small compared to major suppliers like the US, Brazil, and Australia. However, if Trump’s tariffs limit Canadian agricultural exports to the US, China could present an alternative market for Canadian farmers.  

It is important to note that Canadian exports of agricultural products to China continue to face various obstacles, however. In 2021, China banned imports of Canadian beef due to the discovery of a case of bovine spongiform encephalopathy (BSE), which remains in place today. In September 2024, China’s Ministry of Commerce launched an anti-dumping probe into Canadian rapeseed oil, one of Canada’s largest exports. 

Nonetheless, Canada’s food and agriculture exports have continued to reach China in large quantities. Canada exported US$1.5 billion worth of cereals to China, while exports of fish and seafood amounted to US$1.05 billion in value, increasing 7.6 percent from 2022. China also bought US$618 million worth of edible vegetables from Canada in 2023. 

With the potential for US tariffs to make Canadian agricultural exports less competitive in the American market, China’s diversifying tastes and growing demand for premium goods is likely to continue to drive Canadian exports to China, and could help to offset any drops in US sales. 

China-Canada steel and aluminum trade under Trump tariffs 

While China is a net exporter of steel and aluminum, the country also imports smaller quantities of products. In 2024, China imported 6.8 million metric tons of steel and 3.75 million metric tons of unwrought aluminum and aluminum products, according to data from China Customs. 

Almost all of Canada’s steel exports go to the US, and the country only exports a small amount of steel to China. In 2023, steel exports to China reached 6,200 metric tons, accounting for just 0.09 percent of Canada’s total steel exports, according to data from the ITA. By contrast, around 95 percent of Canada’s steel exports are to the US, reaching 6.3 million metric tons in 2023. 

According to the China Iron and Steel Association, China’s main steel product imports were in the form of plates, in particular medium plates, coated plates (strips), cold-rolled thin plates, medium-thick wide steel strips and cold-rolled thin wide steel strips. 

Meanwhile, according to data from the UN Comtrade database, Canada’s largest category of steel exports to China is ferro–alloys, a critical component for the production of steel, exporting US$23.8 million worth of ferro–alloys 2023. 

As with steel, almost all of Canada’s aluminum exports go to the US. In 2023, Canada exported US$$12.6 billion worth of unwrought aluminum and aluminum products, according to data from UN Comtrade, with over 90 percent going to the US. By contrast, Canada exported US$96,293,076 of aluminum to China, accounting for just under 0.8 percent of total exports. The vast majority of Canada’s aluminum exports to China consisted of aluminum waste and scrap, accounting for over 87 percent of the total. 

While China is unlikely to be able completely fill any potential gap created by the US’s tariffs on Canadian steel and aluminum, it is possible that exports to China in certain market segments, such as ferro-alloys and aluminum waste and scrap could, could grow over the coming years. 

While certain segments within China’s steel and aluminum markets could present opportunities for Canada’s exporters, it is still important to consider the broader trade context. In late 2024, Canada imposed tariffs on Chinese steel and aluminum products, leading China to appeal to the World Trade Organization and initiate an anti-discriminatory investigation into these measures. Such trade tensions could influence the dynamics of Canada’s exports to China in these sectors. 

Further tariffs and negotiations 

The imposition of US tariffs on Canadian and Chinese goods presents both challenges and opportunities for Canada-China trade. With U.S. tariffs potentially making Canadian goods less competitive in the American market, China could serve as an alternative outlet for Canadian products, particularly in sectors such as agriculture and energy. 

However, the full impact of the tariffs remains uncertain. The extent to which President Trump will escalate tariffs on Chinese goods, and how China will respond, adds a layer of volatility to global markets. Trump has also vowed to implement reciprocal tariffs on all goods entering the US, which will further complicate trade relations and cause chaos in global trade networks. China has responded in a measured way thus far, targeting a limited range of US imports, leaving the door open for a potential trade deal that will further reshape trade. 

For Canadian and Chinese exporters, navigating these turbulent trade conditions requires strategic flexibility. Canadian exporters should closely monitor developments in US-China relations and adjust their market strategies to take advantage of growing opportunities in China. Similarly, Chinese exporters must be prepared to contend with shifts in tariffs and trade barriers and explore new markets to mitigate risks associated with reliance on the US market. 

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