Canada Is Not Just Another U.S. Trade Partner

What Mark Carney’s Beijing trip says about the future of the USMCA

Canada would be the U.S.’s most important ally due to its geographic proximity alone, but the U.S.–Canada trade relationship is also one of the most deeply integrated economic partnerships on the planet. In 2024, roughly $3.6 billion in goods and services crossed the border every single day, underpinned by interlocked supply chains in energy, autos, and agriculture.¹ The relationship is structured by the USMCA (aka, NAFTA 2.0), but its real foundation is physical: pipelines, factories, farms, and logistics networks that span the border. Canada is a critical supplier to the U.S. economy and one of its most important export destinations, with energy and vehicles accounting for the bulk of flows. Total two-way trade in goods and services reached roughly $909 billion in 2024, making Canada the United States’ largest export market and its second-largest source of imports. Canada isn’t quite the “51st state”…but it also isn’t just any U.S. foreign trade partner. Canada is an extension of the U.S. industrial base.

Which is why Canadian PM Mark Carney’s recent trip to Beijing to conclude, in his words, “Canada and China’s new strategic partnership,” is such a huge development. When asked by reporters in Beijing about the relative reliability of the U.S. as compared to China — a country that in recent years has kidnapped Canadian nationals² and attempted to bully Canada into abandoning the U.S. with tariffs and restrictions on market access — Carney noted that, “In terms of the way that our relationship has progressed in recent months, with China, it is more predictable.” The contours of the initial agreement between the two sides is relatively simple. Canada will allow up to 49,000 Chinese EVs into the country under the most-favored nation tariff rate of 6.1 percent. Under the agreement, the import limit will increase to 70,000 EVs by year five. In return, China will reduce its retaliatory tariff on imports of Canadian canola from a combined 85 percent duty rate to “approximately 15 percent.”³ by March 1. Canada and China also released a joint statement on the “pillars” of the reset relationship which is worth reading in its entirety.⁴

As shocking as Prime Minister Carney’s deal with China is U.S. President Trump’s initial response. U.S. Trade Representative Jamieson Greer described the deal as “problematic” and suggested Canada would come to “regret it.”⁵ But when asked about the deal himself, President Trump volunteered, “That’s OK. That’s what he [Carney] should be doing. It’s a good thing for him to sign a trade deal. If you can get a deal with China, you should do that.”⁶ Those comments from the President came just three days after he suggested that the USMCA was unimportant for the U.S.: “There’s no real advantage to [USMCA], it’s irrelevant…Canada would love it. Canada wants it. They need it.”

Cue this meme (which is how I feel multiple times a week at this point):

Suffice to say…this is not at all what I expected. When my friend Shaun Haney had me on his podcast a few weeks ago, he asked me what advice I’d offer to Prime Minister Carney. I told Shaun that Carney was in the unenviable position of needing to make a deal with President Trump to re-up the USMCA, and therefore should avoid doing much of anything controversial over the next 6-8 months.⁷ Canada is not going to cannot shift its overwhelming trade dependency on the United States overnight, and so I suggested Prime Minister Carney should swallow his pride, kiss the ring…and then start laying a quiet and long-term framework for slowly reducing Canadian dependence on the U.S.

I’m an analyst sitting in New Orleans; Carney has risen to the highest office in his country, so perhaps he is better at this game than I am…but I am shocked he went this far. His predecessor, Justin Trudeau — one of Trump’s least favorite global leaders and a man often pilloried for being weak on China⁸ — did nothing close to this while in power.

Juxtapose Canada’s strategy here with Mexico’s. Just last month, I wrote a long post about Mexico raising tariffs to as high as 50 percent on cars, steel, and other goods from China, India, and other Asian countries with which it lacks a trade agreement.⁹ Mexican President Claudia Sheinbaum recently criticized President Trump for what I think is the first time when she protested the U.S. intervention in Venezuela…but when just days later, President Trump was threatening unilateral U.S. military action on Mexican territory against drug cartels, Sheinbaum chalked it up to miscommunication and quickly got on the phone with Trump to set things right.¹⁰ Mexico’s strategy has been to placate, flatter, and compliment Trump, while aligning Mexican trade policy with the U.S.’s as much as possible. Canada is doing the exact opposite — and this new deal marks a sharp reversal in Canadian trade policy from as recently as October 2024, when Ottawa moved in lockstep with Washington to effectively block all imports of Chinese EVs.¹¹

I allowed myself to take a victory lap on my correct prediction that the U.S. would go for regime chance in Caracas (though the further we get from Maduro’s capture, the more it seems less like regime change and more like trading a recalcitrant Chavista for one willing to collaborate). One of my other high conviction views for 2026 was that the USMCA would be renegotiated and approved likely by summer, and surely by the end of the year. The logic was fairly simple — I trusted (and still do, for now) that U.S. leaders understand that North American free trade makes the USMCA countries the most dynamic economic zone in the entire world — one that punches far above North America’s population and even industrial capacity. The U.S. is in a trade war with China and is raising tariffs against countries around the world — its ace in the hole is its right relations with Mexico and Canada. When I had a trade expert and fellow Cornelian on my podcast a few months ago, he made it clear how catastrophic a U.S. trade war with Mexico and Canada would be for all three.¹² I almost felt bad making it a “forecast” perse…because it seemed too easy and too obvious.

I’m sticking to my guns for now — but the whole point of forecasting is to help make sense of developments as they come. Carney’s trip to Beijing is a serious signpost against my forecast. It is not at all what I expected — it goes far beyond the level of melodrama that has come with USMCA developments since President Trump’s inauguration. I continue to think the constraint of the economic pain a break in the USMCA would unleash on the U.S. economy will prevent the Trump administration from doing too much here…and that Canada’s overwhelming dependence on its economic relationship with the U.S. will limit to the extent to which Carney’s deal with China will represent a “new strategic partnership.” It is hard to overstate the importance of the U.S.-Canada relationship to American geopolitics — the U.S. hasn’t had to worry about an existential threat from a neighbor for generations. And yet while the U.S. is fooling around with Greenland, it’s playing with fire with its northern neighbor.

Maybe the Trump administration wants a deal of its own with China. Maybe the USMCA is going to become the USM. Maybe I’m overestimating the mutual economic dependence, or the awareness in the White House of the potential consequences of a true break in U.S.-Canada relations. Ultimately, North American trade works because it is physical, not diplomatic. Pipelines, factories, and supply chains don’t rewire themselves overnight. But politics can ignore them faster than they can adapt. Carney’s China deal is a reminder that even the deepest industrial integration is only as durable as the leaders willing to respect it. The question now isn’t whether North American integration makes economic sense, it clearly does. The question is whether the political leadership on either side of the border still feels constrained by it.

1. https://www.congress.gov/crs-product/IF12595#:~:text=The%20United%20States%20and%20Canada,goods%20exports%20($350%20billion).

2. https://en.wikipedia.org/wiki/Detention_of_Michael_Spavor_and_Michael_Kovrig

3. https://www.politico.com/news/2026/01/16/china-ev-tariffs-canada-00733086?utm_medium=twitter&utm_source=dlvr.it

4. https://www.pm.gc.ca/en/news/statements/2026/01/16/joint-statement-canada-china-leaders-meeting

5. https://www.reuters.com/business/autos-transportation/us-says-canadas-decision-allow-imported-chinese-evs-is-problematic-2026-01-16/

6. https://www.scmp.com/news/china/diplomacy/article/3340232/trump-shrugs-concerns-over-canada-china-ev-deal-calls-it-good-thing

7. https://www.realagriculture.com/2026/01/frontlines-maduros-capture-could-set-off-unexpected-consequences-for-agriculture-trade-flows/

8. https://www.theamericanconservative.com/justin-trudeaus-weak-sauce-approach-to-china-is-embarrassing/

9.

10. https://www.reuters.com/world/americas/mexicos-sheinbaum-says-had-good-conversation-with-trump-security-drugs-2026-01-12/

11. https://www.politico.com/news/2026/01/16/china-ev-tariffs-canada-00733086?utm_medium=twitter&utm_source=dlvr.it

12.