Carney heads to Beijing to talk trade after years of diplomatic strain with China

Prime Minister Mark Carney is headed to China to try to move past years of diplomatic tension and make progress on a key trade irritant — Canada's steep tariffs on Chinese electric vehicles and the agricultural levies China imposed in response. 

China's ambassador to Canada has said if the country scraps its EV tariffs, China would be prepared to drop its retaliatory tariffs.

A Canadian official who spoke on the condition they not be named said the government expects to make progress in Beijing, but not secure a "definitive elimination" of China's "unfair" tariffs.

"We're not going to see an immediate resolution. But we likely will see some progress or some signals in terms of where they're heading," said Vina Nadjibulla, the vice-president of research and strategy at the Asia Pacific Foundation of Canada. 

Carney's four-day trip to Beijing marks the first visit by a Canadian prime minister since 2017. 

His effort to diversify trade away from the U.S. includes re-engaging with China after a long period of strain that included Beijing detaining two Canadians, Michael Kovrig and Michael Spavor, for nearly three years.

And a public inquiry last year concluded Beijing is the most active perpetrator of foreign interference in Canada, using proxies and diplomatic officials to control and influence the diaspora community.

Nadjibulla calls Carney's visit a milestone in Canada-China relations and a big test. The prime minister has to strategically decide what deals he's willing to make and how to manage the risks, she said.

And any move the prime minister makes on EVs, she said, could impact talks with Washington this year to renew the Canada-U.S.-Mexico agreement (CUSMA).

Canada's 100 per cent Chinese EV tariffs matched the Biden administration's levies and were established to create a united front to protect the North American auto sector. Nadjibulla said if Canada wants to drop its tariffs, that would likely be part of its talks with the U.S.

But she said Canada has other options.

Canada could explore the "European route," she said, and impose a variety of tariffs on specific EVs manufactured in China. The severity of the tariff would depend on how much the carmaker receives in subsidies from China's government and if it plays by rules-based trade, she said. 

Canada could also allow companies to produce Chinese EVs or batteries here, she said. But this would likely face opposition from the auto industry because of its potential to shape the future of Canada's auto sector.

The Canadian official wouldn't say what options are on the table and if there could be a deal in the works. They said there has been a "concerted effort" by Canada and China to address this issue to make "progress over time."