President Donald Trump’s latest trade fight with Canada has a faraway force at its center: China.
As Washington presses Ottawa to do more to prevent Chinese steel, aluminum and other goods from reaching the U.S. market through North American supply chains, Canada is pursuing renewed economic ties with Beijing, adding a fresh complication to already tense trade talks.
At the heart of the fight is transshipment — routing goods through an intermediary country, sometimes after limited processing, before they reach their final market. U.S. officials fear steel and aluminum made in China or elsewhere could be processed in Canada or Mexico and then enter the United States as regional content.
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The U.S. and Canada addressed that risk in a 2019 joint statement resolving an earlier steel-and-aluminum tariff dispute. The countries agreed to prevent steel and aluminum made outside the U.S. or Canada from being transshipped into the other country, and said they could distinguish between steel melted and poured in North America and steel made elsewhere.
U.S. trade hawks now argue Canada should accept tougher safeguards as Washington seeks to limit China’s role in critical manufacturing supply chains.
Canada claims it is already taking steps to keep foreign steel from flooding its market. Ottawa limits some steel imports from countries without a free-trade agreement, including China, and imposes a 50% surcharge once those limits are exceeded.
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But Canada has also moved to strengthen trade ties with Beijing.
In March, China agreed to reopen its market to several Canadian farm and seafood exports, including canola, peas, lobster and crab. Canada, meanwhile, established a 49,000-vehicle annual quota for Chinese EVs at the 6.1% most-favored-nation tariff rate, removing its previous 100% surtax.
Canada also extended tariff relief for some Chinese steel and aluminum products it says are in short supply. Officials say the arrangement is part of a broader effort to diversify Canada’s trade relationships. China is Canada’s second-largest merchandise trading partner.
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The arrangement has fueled criticism in Washington that Canada is moving in the opposite direction from the Trump administration’s effort to build a more China-resistant North American trading bloc.
For Trump, the growing question is whether Canada is willing to embrace the same approach — or whether it’s bid to expand trade with Beijing will become another fault line in an already tense relationship.
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