Growing canola is a delicate process. The small seeds require careful management, as they are sensitive to moisture, extreme temperatures, and weed competition. However, the real challenge lies in navigating the complex diplomatic landscape to deliver the product to customers. The United States is the largest market for Canadian canola, followed by China.

In 2024, the U.S. encouraged Canada to impose 100 percent tariffs on Chinese electric vehicles as part of its trade conflict with Beijing. This has put Prime Minister Mark Carney in a difficult position, as his government seeks to lessen its reliance on the U.S. market. In retaliation for the EV tariffs, China has imposed a 76 percent tariff on Canadian canola.

Carney faces the challenge of lifting China's canola duties without upsetting U.S. relations. A report from a group of experts on Canada-U.S. relations, which included former national security adviser Vincent Rigby and retired Vice-Admiral Mark Norman, suggested that Canada should pursue a policy of "selective engagement" with China. The report warned that too much independence in Canada’s China policy could provoke retaliation from Washington, while excessive alignment with the U.S. could undermine Canadian sovereignty and efforts to diversify trade partnerships.

Carney may feel frustrated by this ambiguous guidance. The report does not specify how Canada can achieve a balance of "inconspicuous independence." Since a call with Chinese Premier Li Qiang in June, there has been a shift in relations, although Canada remains cautious, recognizing that it is dealing with a superpower that it cannot fully trust or ignore.

Recently, Carney announced a suspension of Canada’s electric vehicle mandate, which required that 20 percent of all cars sold next year be zero-emission vehicles or plug-in hybrids. This suspension will last for 60 days while the government reviews options to make electric vehicles more affordable. Much of this decision aims to protect Canadian agriculture and seafood industries from Chinese tariffs. Reporters questioned whether the government might consider lifting the EV tariff in exchange for access to Chinese markets for canola.

Carney indicated that Canada has begun "intensive engagement" with China, focusing on canola and seafood, but he expects discussions to expand. Lifting the EV tariff could help reduce transportation emissions and would likely be welcomed by China, which previously imported $4 billion worth of Canadian canola before imposing tariffs.

Chinese officials are eager to position themselves as reliable trading partners amid the ongoing trade tensions, despite past issues such as intellectual property theft and arbitrary detentions. Saskatchewan Premier Scott Moe, currently in China with Carney’s parliamentary secretary, Kody Blais, supports the removal of the EV tariff. Alberta Premier Danielle Smith has also advocated for scrapping the duty, suggesting that Canada can maintain separate relationships with both the U.S. and China.

However, this theory remains untested. The U.S. may view the importation of inexpensive Chinese EVs into Canada as a backdoor entry into its market, potentially leading to further tariffs on Canadian canola. The auto industry on both sides of the border faces significant challenges from heavily subsidized Chinese vehicles, such as the BYD Seagull, which retails for about $7,800 in China.

As consumer subsidies for electric vehicles in Canada and the U.S. are set to expire, automakers are under pressure to offer more affordable options. Ford CEO Jim Farley described the situation as the company’s "Model T moment" as it prepares to launch a mid-sized electric pickup truck in 2027, expected to retail for around $30,000. Other automakers, including Tesla and GM, are also working on more affordable models.

Despite the challenges, Canadian automakers welcomed the suspension of the EV mandate and the announcement of a $5 billion strategic response fund to help businesses adapt to the changing trade environment. However, opening the market to Chinese vehicles could pose significant risks. Carney must determine whether he has the political support to pursue a non-aligned trade policy, a decision that could have lasting implications for his administration.