In a major diplomatic de-escalation, Canadian Prime Minister Mark Carney clarified on Sunday, January 25, 2026, that Canada has “no intention” of pursuing a comprehensive free trade agreement (FTA) with China.
The statement follows a weekend of intense geopolitical friction, during which U.S. President Donald Trump threatened to impose a 100% tariff on all Canadian imports if Ottawa proceeded with a deepened trade partnership with Beijing.
1. The Trump Threat: “Drop Off Port” Warning
The tension erupted on Saturday, January 24, when President Trump took to Truth Social to warn that Canada would be “devoured” by China if it didn’t align its trade policy with the United States.
- The 100% Clause: Trump explicitly stated that any “deal” with China would trigger an immediate 100% tariff on all Canadian goods entering the U.S.
- The “Backdoor” Concern: U.S. Treasury Secretary Scott Bessent echoed these concerns on ABC’s This Week, stating that Washington will not allow Canada to become a “drop-off port” for cheap Chinese goods to circumvent U.S. trade restrictions.
- Greenland Tensions: The tariff threat is also seen as leverage in a broader dispute regarding Canada’s opposition to the U.S.-led “Golden Dome” missile defense project and Trump’s ongoing interest in acquiring Greenland.
2. The Carney Defense: “Rectifying Issues,” Not an FTA
Prime Minister Carney pushed back against the “misinformation” surrounding his recent diplomatic visit to China, characterizing the arrangement as a narrow “rectification” of recent trade wars.
| Feature | The “Stabilization” Arrangement (Jan 2026) |
| EV Quota | Canada will allow up to 49,000 Chinese EVs annually at a 6.1% tariff (rising to 70k over 5 years). |
| Agri-Relief | In exchange, China will lower its 100% retaliatory taxes on Canadian canola, pork, and seafood. |
| CUSMA Compliance | Carney emphasized that Canada is bound by CUSMA Article 32.10, which requires prior notification before talks with a “non-market economy.” |
| Market Share | The EV cap represents just 3% of Canada’s annual vehicle sales. |
3. The Davos Fallout: “On the Menu”
The diplomatic rift was exacerbated by Carney’s speech at the World Economic Forum in Davos last week. Without naming Trump, Carney warned that “middle powers” must act together because “if you are not at the table, you are on the menu.” Trump later responded on social media, reminding Carney that “Canada lives because of the United States.”
4. Impact on the 2026 CUSMA Review
This standoff serves as a high-stakes prelude to the CUSMA Joint Review scheduled for later this summer.
- Pre-positioning: Carney suggested that Trump’s 100% tariff threat should be viewed as “pre-positioning” and “bluster” ahead of the trade pact renewal.
- Automotive Anxiety: The Canadian Vehicle Manufacturers’ Association warned that there is “no Canadian auto industry without U.S. access,” putting pressure on Ottawa to prioritize the D.C. relationship over Beijing.
Conclusion: A Return to the “North American Core”
By Sunday afternoon, reports suggested that Carney had spoken with Trump and was “aggressively walking back” some of the more provocative rhetoric from Davos. While Canada has successfully unlocked over $7 billion in agricultural export markets through its narrow deal with China, the immediate threat of a 100% U.S. tariff has forced a strategic retreat. For 2026, Canada’s “trade diversification” strategy appears to have hit its northernmost limit at the U.S. border.
