Canada Embraces China With Trade Deal on Electric Vehicles, Agriculture Exports

Welcome to Foreign policyChina Brief.

Highlights of this week: China strikes A Business deal With Canada and China Birth rate It reaches record levels and progress continues on the Chinese side Grand Embassy in the United Kingdom.

Welcome to Foreign policyChina Brief.

Highlights of this week: China strikes A Business deal With Canada and China Birth rate It reaches record levels and progress continues on the Chinese side Grand Embassy in the United Kingdom.

Canada and China agree to a trade deal

Last Friday, Canada and China concluded a preliminary trade agreement that would open the Canadian market to Chinese electric vehicles and reduce retaliatory Chinese tariffs on key Canadian agricultural exports. Ottawa has framed the move as an attempt to reposition Canada in a “divided and uncertain world” and to protect against the volatility of the United States under President Donald Trump.

It’s a notable development considering how relations between Canada and China deteriorated after 2018, when Canada arrested Huawei CEO Meng Wanzhou (at the request of the Trump administration) and China retaliated by detaining Canadian citizens, sparking a three-year diplomatic crisis.

The deal will undoubtedly revive accusations of malign Chinese influence and Canadian perfidy by American right-wingers and China hawks. But a year into Trump’s second term, moving closer to Beijing makes perfect sense for Ottawa, as well as for the European Union. China is a global leader in green technologies that Washington now opposes, and, as Canadian Prime Minister Mark Carney noted during his visit to Beijing, a more predictable partner than the United States.

Frankly, a relatively rational authoritarian regime with limited and stable foreign policy goals an ocean away might seem better than a state run by an eccentric autocrat next door. In this regard, the ongoing Greenland crisis has given Canada’s leaders greater clarity about the United States as it is, not as it was or as they want it to be.

In contrast to the United States under Trump, China’s foreign policy ambitions and ideological goals have been clear for decades: it wants to invade Taiwan, control nearby disputed islands, and force the United States out of East Asia, while exerting influence over the Chinese diaspora and silencing criticism of its human rights record.

Canada and other democracies don’t like these goals, but at least they are consistent. For example, China would not one day choose to invade North Korea or Thailand instead. To be sure, countries have often underestimated how far China is willing to go on these issues, but after years of diplomatic standoff, Canadian leaders may feel they understand how to run Beijing — something they can no longer say about Washington.

It would be helpful for China to tone down its “wolf warrior” tone and back away from some of its more aggressive stances, which have been affected by the economic recession and internal tensions over corruption and unemployment. The burgeoning Canada-China relationship could sour at any moment, as the ongoing dispute between China and Japan has demonstrated, but such potential instability is more likely than that imposed by the US president.

Trump will eventually leave office, but allies must live with the fact that the United States elected him twice and that checks on presidential power appear to have failed to curb his imperial ambitions. Even a stable and predictable future US government will operate in this shadow, eroding the goodwill that Washington relies on in confronting China.

But none of this guarantees that China will remain stable or predictable either. President Xi Jinping is the most powerful Chinese leader since at least Mao Zedong, and so far he has led China in a somewhat unsurprising way. But that could change quickly, as European leaders learned from Russia’s large-scale invasion of Ukraine in 2022 after Russian President Vladimir Putin’s decade-long miscalculation.

As Carney explained in a speech to the World Economic Forum on Tuesday, the real lesson here may be that medium-sized countries are better off relying on each other’s solidarity than putting their fate in the hands of any great power.

What we follow

Birth rate crash. China on Monday released its 2025 demographic data, and it is as bleak as expected. China’s birth rate has fallen to a record low, and its population has shrunk by about 3 million people. This decline has been years in the making, despite repeated government efforts to reverse it, whether by changing population control policies or banning private tutoring to keep parents’ costs low.

In the long term, a smaller population could alleviate environmental and economic pressures. But in the short term, this exacerbates fears that China will grow old before it gets rich, with a shrinking workforce struggling to support a rapidly growing retirement population.

Beijing now faces a series of difficult choices, including raising the retirement age, encouraging immigration, or returning to coercive pro-natalist policies, such as restricting abortion or trying to restrict women’s participation in the workplace.

Taiwan blockade exercise. China has been practicing using thousands of fishing boats to form massive sea barriers, assembling barriers up to 200 miles long at least twice in recent weeks, according to a new report. New York Times analysis.

Although the ships are nominally civilian, they are widely believed to be part of China’s hidden maritime militia, a paramilitary force that Beijing has long used to harass the Philippines and others at sea. The exercises appear to be aimed at imposing a blockade on Taiwan, an option that does not resemble war and aims to starve the island into political submission.

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Technology and business

EV glut. Efforts to curb fierce price wars in China’s booming car industry have failed, with the major auto dealers association warning that manufacturers are still shedding excess stock. More than half of dealers reported losses last year, while just over a quarter made profits.

Beijing is trying to rein in deep discounts, but prices, especially for electric cars, continue to fall. That’s great for consumers today but unhealthy for the industry in the long term: nearly 80% of EV startups have gone bankrupt since 2018. A more stable market could also allay fears of Western countries being flooded with cheap Chinese EVs, which could lead to an easing of trade restrictions.

Grand UK Embassy. China has finally won planning permission to build a massive new embassy in London, a project that critics warn could serve as a hub for espionage. Chinese intelligence activity became a major political issue in Britain last year after a series of scandals, yet British Prime Minister Keir Starmer’s government is keen to improve trade relations with China to offset the weakened economy due to Brexit and hedge against the Trump administration.

These hopes may yet be dashed. Despite the government’s approval, a wave of legal challenges supported by members of parliament threatens further delay. Given Britain’s cumbersome construction planning system, Starmer may have difficulty convincing Beijing that the setbacks are bureaucratic rather than political.