Canada will not seek a free trade agreement with China, Prime Minister Mark Carney said Sunday, after US President Donald Trump warned he could impose 100% tariffs on Canadian exports if Ottawa deepens trade ties with Beijing.

Carney said Canada respects its obligations under the US–Mexico–Canada Agreement (USMCA/CUSMA) and would not negotiate any major trade deal without informing Washington and Mexico.

“We have no intention of pursuing a free trade deal with China,” Carney told reporters.

Trump escalates pressure

Trump threatened the punitive tariffs on Saturday, accusing Canada of potentially becoming a gateway for Chinese goods into the US.

“If Governor Carney thinks he is going to make Canada a ‘drop-off port’ for China, he is sorely mistaken,” Trump wrote on Truth Social.

Treasury Secretary Scott Bessent backed the warning, saying the US could not allow Canada to become an entry point for cheap Chinese exports.

Background: Canada–China tariff truce

The tension follows a January 16 agreement between Ottawa and Beijing that eased tariffs on selected goods.

  • Canada agreed to allow 49,000 Chinese electric vehicles annually at a reduced 6.1% tariff
  • China cut duties on Canadian farm exports, including lowering canola oil tariffs to 15% from 85% starting March

Carney said the deal only fixes earlier trade disruptions and remains “entirely consistent with CUSMA.”

Growing US–Canada trade strain

Relations between Washington and Ottawa have been increasingly tense. Trump last year raised tariffs on some Canadian goods to 35%, and recently withdrew Canada’s invitation to join his new “Board of Peace.”

Despite the pressure, Carney stressed Canada would not jeopardize its core trade pact with the US.

Canada is stepping back from deeper trade with China to avoid triggering a fresh tariff war with Washington. Trump’s latest threat adds another flashpoint to an already fragile US–Canada trade relationship, keeping markets and exporters on edge.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Related: What to Watch This Week in Markets: Fed Day, Big Tech “Show Me” Earnings