Why China imposed 100% tariffs on Canada: A comprehensive analysis

In a significant escalation of trade tensions, China has imposed a 100% tariff on Canadian canola oil, canola meal, and pea products, alongside a 25% tariff on Canadian pork and seafood imports, effective March 20, 2025. This move, announced by China’s Customs Tariff Commission, is a direct response to Canada’s earlier imposition of a 100% tariff on Chinese electric vehicles and a 25% tariff on steel and aluminum imports in October 2024.

The Chinese government has framed these tariffs as a justified countermeasure to Canada’s “restrictive measures”, which it claims have disrupted normal trade order and harmed the legitimate rights of Chinese enterprises. This article delves into the historical, economic, and geopolitical factors behind China’s decision, its implications for global trade, and the broader context of escalating trade tensions between the two nations.

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The immediate trigger: Canada’s tariffs on Chinese goods

The catalyst for China’s retaliatory tariffs lies in Canada’s decision to impose steep tariffs on Chinese electric vehicles, steel, and aluminium. These measures were part of a broader trend of protectionist policies adopted by Western nations, often citing national security concerns and unfair trade practices.

Canada’s tariffs on Chinese goods were seen as aligning with US trade policies, which have increasingly targeted Chinese industries under the banner of economic sovereignty and national security. By imposing a 100% tariff on Canadian canola and pea products, China is sending a clear message that it will not tolerate what it perceives as unjust trade barriers.

The economic stakes for Canada

Canada is one of the world’s largest producers of canola, with exports to China reaching 6.39 million tons in 2023. Canola exports are a critical economic lifeline for Western Canadian provinces, making China’s 100% tariff a significant blow to Canadian farmers and agricultural exporters.

The tariff effectively shuts Canadian canola out of the Chinese market, forcing producers to seek alternative markets or face severe financial losses. Similarly, the 25% tariffs on pork and seafood will disrupt supply chains and increase costs for Canadian exporters, who have long relied on China as a major trading partner.

The broader geopolitical context

China’s tariffs on Canada cannot be viewed in isolation; they are part of a complex web of retaliatory trade measures involving the United States, Canada, and Mexico. The US recently imposed a 25% tariff on most Canadian and Mexican imports and a 20% tariff on Chinese imports, citing national security concerns related to illegal migration and fentanyl flows.

In response, Canada imposed a 25% tariff on $105 billion worth of US goods. This tit-for-tat escalation reflects a broader shift toward protectionism as nations prioritise domestic industries and strategic interests over the principles of free trade that dominated previous decades.

Josh Lipsky of the Atlantic Council’s GeoEconomics Center suggests that China’s timing is strategic, aimed at resetting trade relations with Canada ahead of a broader trade conflict with the US. By imposing tariffs now, China may be seeking to strengthen its negotiating position and send a warning to other nations considering similar measures under US pressure. The Chinese government has framed its actions as a “powerful countermeasure” to Canada’s “wrong choice” and a warning to other countries contemplating additional tariffs on Chinese goods.

The impact on global trade relations

The escalating trade tensions between China and Canada are emblematic of a broader trend toward protectionism and economic nationalism. Both nations accuse each other of violating World Trade Organization (WTO) rules, yet neither appears eager to seek WTO intervention.

Instead, they seem to prefer bilateral solutions, reflecting a growing skepticism toward multilateral frameworks. This shift threatens to fragment global supply chains, increase costs for businesses and consumers, and undermine the stability of the global trading system.

The ripple effects of these tariffs could extend far beyond China and Canada. As the US, China, Canada, and Mexico engage in retaliatory measures, other nations and sectors may be drawn into the conflict, further destabilising the global economy. The fragmentation of supply chains and the rise of protectionist policies could lead to higher prices, reduced efficiency, and slower economic growth worldwide.

The domestic challenges for China and Canada

For Canada, the tariffs come at a particularly challenging time for its agricultural sector, which relies heavily on exports to China. Canadian farmers must quickly find alternative markets for their products, while Chinese importers will need to secure new sources for agricultural goods or accept higher prices. Consumers in both nations are likely to see price increases across various sectors, from food products to manufactured goods, as the cost of these trade barriers is passed down the supply chain.

For China, the tariffs may exacerbate existing economic challenges, including domestic oversupply in the pork market and broader concerns about economic slowdown. By targeting Canada’s agricultural sector, China risks further straining its own supply chains and increasing costs for its consumers. However, the Chinese government appears willing to accept these short-term costs in pursuit of its broader strategic objectives.

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A new era of trade relations

The imposition of 100% tariffs by China on Canadian agricultural products marks a significant escalation in trade tensions between the two nations. Rooted in a broader context of protectionism and geopolitical maneuvering, these tariffs reflect a shift away from the principles of free trade that have underpinned the global economy for decades. As nations prioritise domestic industries and strategic interests, the global trading system faces increasing fragmentation and instability.

For now, Canadian farmers and exporters must grapple with the harsh reality of losing a major market, while diplomatic efforts continue behind the scenes to find a resolution that allows both sides to claim victory without further economic damage. The broader implications of these tariffs for global trade relations remain uncertain, but one thing is clear: the era of unfettered free trade is giving way to a new reality defined by economic nationalism and strategic competition.

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