Canada has reached a preliminary trade agreement to expand oil exports to Beijing while reducing tariffs on Chinese electric vehicles. Mark Carney, the Canadian prime minister, has hailed it as the start of a new “strategic partnership,” widely viewed as part of his efforts to reduce his country’s reliance on the United States.

In the case of oil, it certainly offers the opportunity to achieve that. Canada’s Trans Mountain Expansion pipeline, which became operational in May 2024, can transport 890,000 barrels per day from Alberta to British Columbia. This infrastructure gives Canada meaningful access to Asian markets, diversifying its export destinations beyond its traditional near-total dependence on the U.S.

Exporting commodities such as oil to China also provides Canada with economic leverage with Beijing. This is not like the export of sensitive technologies, where there might be legitimate national security concerns, and Chinese import volumes are unlikely to be so substantial that Beijing would be able to exercise undue influence through threats to cease purchases. Oil carried through the new pipeline could account for 10 per cent of Canada’s total exports by 2030, but precise future projections remain uncertain.

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The more problematic element of the agreement concerns electric vehicles. Canada has agreed to permit imports of up to 49,000 Chinese electric vehicles annually at a tariff rate of 6.1pc, down significantly from the previous 100pc tariff. By 2030, some reports indicate that this quota could rise to approximately 70,000 vehicles, with at least 50pc priced below Ca$35,000.

This effectively grants Chinese manufacturers preferential access to the Canadian market at tariff rates substantially lower than those maintained by the U.S., Canada’s closest ally and largest trading partner. This could complicate North American automotive industry coordination and potentially strain Canada-U.S. relations. The imports of Chinese EVs are likely to undercut purchases of Canadian-made vehicles, too. Small wonder that Global Automakers of Canada lost no time in complaining.

There are also serious security concerns. Modern connected vehicles collect substantial amounts of data, including location information, driving patterns, and personal details provided during purchase and financing. Vehicles manufactured by companies subject to Chinese government influence could theoretically be equipped with capabilities beyond standard telematics systems.

The precedent of the U.S. Federal Communications Commission’s prohibition of Huawei and ZTE telecommunications equipment on national security grounds suggests that Western governments should take such technology transfer concerns seriously.

This is particularly true given the technological capabilities of modern vehicle systems, which can be accessed remotely. While this serves legitimate purposes, such as in recovering a stolen vehicle, it also represents a potential vulnerability if controlled by potentially adversarial parties.

These concerns take on even greater relevance given China’s growing power within the global EV market. BYD, Beijing’s leading EV manufacturer, exported approximately one million vehicles globally in 2025, marking a milestone in the company’s international expansion. It has established a significant presence in multiple international markets, undercutting local auto production, and is investing in overseas production facilities.

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Reports indicate that Ford Motor Company is exploring partnerships with BYD for battery supply to its overseas manufacturing facilities. These discussions, though, remain preliminary and have drawn criticism from U.S. government officials concerned about supply chain security.

China maintains significant advantages in battery production costs through vertical integration, scale, and domestic policies supporting the industry. The country produces approximately 70pc of global batteries and controls 60pc of critical battery minerals. Is Canada really sure if it wants to be furthering Chinese dominance, particularly through preferential tariff rates?

Carney’s agreement with China reflects his stated foreign policy approach of engaging pragmatically with the world “as it is” rather than as Canada might wish it to be. The oil export component of his deal is economically rational and strategically sound. However, the electric vehicle import concessions are troubling due to their implications for car industry competitiveness and short- and long-term national security.

Carney’s strategy might well be to diversify Canada’s economy away from reliance on the United States. It would be highly ironic if that left his country vulnerable in critical areas to the Communist rulers of Beijing.