US President Trump’s protectionist trade policies allow China to swoop in

America’s top trading partners are responding to President Donald Trump’s belligerent and unpredictable trade policies by trying to take their business elsewhere. Canada broke with the United States on Friday, slashing its 100 per cent import tax on Chinese electric vehicles in return for lower tariffs on Canadian farm products, particularly canola seeds. “It’s a huge declaration of realignment in Canada’s economic relations,” said Edward Alden, who studies trade issues as a senior fellow at the Council on Foreign Relations.

“The economic threat from the United States is now perceived by Canadians as far bigger than the economic threat from China. So this is a big deal.’  Canada has repeatedly been the target of Trump’s impulsive wrath. In October, for instance, he said he was imposing a 10 per cent tariff on Canadian imports as a reprisal for Ontario’s provincial government airing an advertisement that criticised the president’s go-to diplomatic tariff tool. He didn’t follow through on the increase, but tariffs on some key Canadian sectors like steel and aluminium remain. 

But Friday’s deal with China is a potentially perilous one for Canada’s prime minister, Mark Carney, who risks retribution from Trump on the eve of negotiations over the renewal of a North American trade pact that is crucial to Canadian businesses. Canada is not alone in looking for alternatives to America’s massive market as Trump slaps massive tariffs on imports in an attempt to strong-arm other countries into moving production to the United States.

The European Union is expected to formally sign a trade pact Saturday with the South American alliance known as Mercosur, which includes the region’s two biggest economies, Brazil and Argentina. The EU is also pursuing a trade deal with India. China, pounded by US tariffs since Trump’s first term, has diversified its exports away from the world’s biggest economy to markets such as Europe and Southeast Asia.

It seems to be working. China’s trade surplus with the rest of the world surged to a record $1.2 trillion in 2025, the Chinese government reported Wednesday, despite tumbling exports to the US . Since returning to the White House in January, Trump has overturned seven decades of US policy in favour of ever freer trade. He’s imposed double-digit taxes on imports from almost every country on Earth, as well as singling out specific industries, such as steel and autos, for levies of their own.

Trump says tariffs will raise money for the US Treasury, protect American industries, and bring investment into the United States. On Thursday, in fact, Taiwan agreed to invest $250 billion in the United States in return for Trump reducing the tariff on its products to 15 per cent from 20 per cent. The president’s use of tariffs has often been arbitrary and unpredictable.  He targeted Brazil, for instance, for prosecuting his friend, former Brazilian president Jair Bolsonaro. On Friday, he threatened to slap tariffs on countries that don’t support his efforts to wrest control of Greenland from Denmark.

Friday’s deal in Beijing marks a turnabout in Canadian policy. In 2024, Canada followed the US by imposing 100 per cent tariffs on EVs from China, reflecting fears that inexpensive Chinese cars would overwhelm domestic North American automakers. First, it’s canola farmers who need export markets, and this pact lowers China’s tariff on canola from 84 per cent to 15 per cent. Canola farmers are hailing Canada’s new trade deal with China as great news that could restore exports for the major crop. Second, the Trump administration, favoring fossil fuels over green energy, “is actively hostile to EV production in North America,’ said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics.

 America’s opposition “threatens to make the North American (auto) industry obsolete in the future, as China moves ahead with rapid quality improvements in batteries and electronics for EVs.’ “China’s strengths in the electric vehicle sector are undeniable,” Carney said Friday.

China produces some of the most affordable and efficient vehicles in the world. And in order for Canada to build our own competitive EV sector, we need to learn from innovative partners, access their supply chains, and increase local demand.’ But Carney’s economic rapprochement with Beijing amounts to a gamble. “This was an extraordinarily difficult thing for Carney to do,’ Alden said.

“Relations between Canada and China have been extremely fraught.’ In 2018, China detained two Canadians in retaliation for Canada arresting an executive of the Chinese tech firm Huawei at the request of the United States. All three were released in a 2021 swap. Canada also launched an investigation three years ago into whether the Chinese interfered in Canadian elections in 2019 and 2021.