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Carney is testing how far Canada can push trade diversification without upsetting its biggest ally. But how far is too far?
In today’s sub-chapter:
🤝Canada-China deal. What it means for Ottawa and Trump
⚠️AI’s take on Trump’s 100% tariff threat on Canada
📈 2025 ocean and air freight insights & new trends in 2026
😂The “Father of All Deals”
IS CARNEY THE STRONG MAN OR THE WEAK MAN?
Jan. 16, 2025. Carney signed a preliminary agreement with China, which the gov’t expects to deliver “historic gains” for Canadian farmers.
A few days later, during a speech at the WEF in Davos, he said that the world order is in the midst of a rupture and urged fellow middle powers to come together.
He didn’t mention Trump, but he didn’t have to.
Makes me remember a Substack I read by a John Doe that says, “Carney’s bluster painted him the STRONG MAN.”
Right? But at what cost?
A “Strategic Reset” with Strings Attached
Trump has threatened a 100% tariff on Canada if it moves ahead with the announced trade agreement.
He also warned that "China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life."
Canada insisted that it’s more of a strategic reset and that it has “never” considered pursuing a free trade agreement with Beijing.
ICMYI, the deal cuts Chinese EV tariffs in Canada from 100% to 6.1% for up to 49,000 vehicles. In return, China will reduce tariffs on Canadian canola seed to about 15% by March 1, 2026.
Article 32.10 of CUMSA limits free trade agreements, but not ALL arrangements. So, given the rules, there’s no FTA violation.
And the deal brought some good news for the agriculture sector. It would bring relief to many farmers who have been severely affected by China’s tariffs on Canadian canola oil.
In 2019, China stopped importing canola seeds from major Canadian companies after revoking their export licenses over pests and disease concerns. The ban ended in 2022, and exports rebounded in 2023 and 2024.
Source: China Briefing
The Canadian government believes the deal will directly improve access for Canadian Canola seed producers to the Chinese market, which is worth about CA$4 billion annually.
The Weak Man
On the downside, automakers aren’t so happy.
Experts say reduced EV tariffs could undermine domestic auto manufacturing and disrupt North American supply chains. Vivek Astvansh, a business professor at McGill University, said the expected rise in Chinese EV sales could put pressure on U.S. EV makers like Tesla as they try to grow their market in Canada.
The most expensive price Canada wants to avoid? Washington noticing that it’s quietly warming up to China.
Carney, for sure, knows what’s at stake, especially with the upcoming USMCA review. He knows that any hint of compromise on China could trigger retaliation through tariffs or stricter Buy American rules.
Or even U.S. withdrawal from CUSMA, which I discussed in a previous edition.
These measures could lead to supply chain disruptions, lost jobs, and weakened confidence within North America’s integrated markets.
Which is why the Substack I’ve read also says, “If we examine the economic position, it paints him as the WEAK MAN.”
China As a More Predictable Partner?
Carney said Canada’s relationship with China has now become more predictable than that of the U.S. But is this “new strategic partnership” reliable? And can it replace the U.S market?
Even better: Can Ottawa withstand China’s economic coercion tactics, which experts call more predatory than those of the U.S.? For example, when Australia called for a COVID‑19 probe in 2020, China retaliated with a combined tariff of 80.5% on barley and up to 218% on wine. Can Canada handle this kind of pressure?
Plus, in 2024, about 76% of Canada’s exports headed to the U.S., while China accounted for only 3.8%. A huge difference. Which means Canada’s economy greatly depends on the U.S.
Source: Scotiabank
Canada isn’t wrong to diversify and engage with other trading partners, but it should also focus on rebuilding trust with its most vital partner: the U.S. But if Canada goes ahead and softens its stance on China and engages in trade concessions, it should do so selectively.
So yes, Carney is The Strong Man, if all he’s trying to pursue is a pragmatic trade strategy that successfully diversifies Canada’s global partnerships, while still reinforcing, not replacing, its North American foundation.
100% TARIFF ON CANADA. AI DID THE MATH!
I asked ChatGPT to assess the potential effects of Trump’s 100% tariff on Canada, based on 2024-2026 data.
Disclaimer: Edited for clarity and sources checked for accuracy. AI may make mistakes, so please treat it as a reference only.
Impact on Canadian Exports
Overall Exposure: Canada’s merchandise trade has steadily grown over the past several years, with exports and imports reaching record levels by 2024. And about 75–80% of Canadian goods exports go to the U.S., so a 100% tariff would sharply cut competitiveness in its largest market.
Source: Global Affairs Canada
Autos and Auto Parts: Canadian auto exports rely on highly integrated cross-border supply chains. Tariffs applied at each stage would escalate costs, likely causing significant long-term reductions in export volumes.
Energy: Canada supplies a substantial share of U.S. crude oil and natural gas. A 100% tariff would push U.S. buyers toward alternative suppliers, cutting shipments and lowering prices.
Manufacturing and Forestry: Canadian-manufactured goods, including lumber and other wood products, would become more expensive for U.S. buyers, triggering declines in demand and production.
Agriculture: Products like canola and beef would lose market access, forcing producers to seek lower-priced alternatives or new markets.
Cross-Border Supply Chains
Canada and the U.S. maintain integrated supply chains, particularly in autos and machinery. 100% tariffs would:
Disrupt production linkages
Raise manufacturing costs
Encourage firms to reorganize supply networks outside North America
Effects on U.S. Consumer Prices vs. Canadian Producer Margins
U.S. Consumers: A 100% tariff would sharply raise prices on Canadian-origin goods unless foreign suppliers absorb duties. Automobiles, lumber, and machinery would become costlier for U.S. consumers and businesses.
Canadian Producers: Exporters face two pressures:
Lower U.S. demand reducing sales volumes
Higher costs for imported inputs if Canada retaliates or currency shifts occur
Short-Term vs. Long-Term Dynamics
Short-Term: Exporters may ship ahead of tariffs, temporarily boosting volumes, but this effect would reverse quickly.
Long-Term: Permanent loss of U.S. market access without comparable alternatives would likely shrink Canadian sector size and reduce productivity.
Realistic Canadian Responses
WTO: Canada can request consultations, potentially leading to a binding ruling if U.S. measures violate WTO obligations.
USMCA: The agreement’s dispute mechanism provides another forum to challenge tariffs, often faster than WTO proceedings.
Targeted Retaliation: Canada could impose dollar-for-dollar tariffs on U.S. goods, targeting sectors important to U.S. states or industries, influencing U.S. political dynamics.
Trade Diversification:
Expand exports to the EU, Asia, and other markets
Negotiate bilateral and regional agreements to reduce reliance on the U.S
QUICK HITS ON GLOBAL TRADE
🤝 India-US Tariffs Cut To 18%. President Trump announced on Truth Social a deal cutting India’s main tariff from 25% to 18% and removing a 25% U.S. tariff tied to Russian oil. India will stop buying Russian oil and purchase $500 billion in U.S. goods. The announcement follows India and the EU’s so-called “mother of all deals,” quickly sparking memes online calling this one the “father of all deals.”
🚫 CBP Blocks Mexican Coffee Over Forced Labor. U.S. Customs issued a Withhold Release Order (WRO) on coffee from Mexico’s Finca Monte Grande, effective immediately, due to forced and child labor. Shipments will be detained at all U.S. ports. Evidence includes worker statements, government and NGO reports, and six ILO forced-labor indicators.
🇺🇸 Trump Launches $12B Project Vault to Reduce China Dependence. Trump announced Project Vault, a $12 billion rare earth stockpile ($1.67 B private capital, $10 B Ex-Im Bank loan) aimed at cutting U.S. reliance on China. Minerals like gallium and cobalt will supply GM, Boeing, Google, and others. Companies pay up-front fees and commit to future repurchases.
STILL BUMPY, BUT NEW CURRENTS ARE FORMING
We will continue seeing the impacts of tariffs on ocean and air freight flows in 2026. But there might be some new trends. Here are key insights from Freighto’s What 2025 Means for 2026: Ocean and Air Freight Forecast.
Global container growth: China’s exports increased more than 5% YoY through Nov. 2025; global volumes rose more than 4% YTD through Oct. despite U.S. import declines.
Fleet oversupply: Despite Red Sea diversions, the Freightos Baltic Index shows rapid fleet growth left the container market oversupplied in 2025, with Asia–Europe and transpacific rates falling below 2024 levels even at peak demand.
Source: Freightos
Red Sea return risk: Resuming transits in 2026 could trigger congestion at European hubs, equipment shortages at Far East ports, and short-term rate spikes.
Air cargo resilience: Asia-Europe and intra-Asia lanes grew in double digits in 2025, offsetting stalled transpacific volumes.
De minimis closure impact: U.S. suspension of China eligibility caused more than 40% month-on-month drop in e-commerce air imports in May; volumes recovered to 2024 levels by July.
Stable air rates: China-to-U.S. and China-to-Europe rates increased 1 percent and 2 percent for the year; carriers redeployed capacity to high-demand lanes, maintaining stability.
Return of seasonality: U.S. tariff stabilization in late 2025 suggests first and second half volume patterns may normalize in 2026.
DON’T WAIT OUT THE TARIFFS!
In his latest LinkedIn Pulse article, Michael Keen, a business and strategy advisor, explains why waiting out tariffs can hurt companies.
He pointed out that even though the SCOTUS is still deciding on Trump’s IEEPA tariffs, other laws like Sections 232, 301, 122, and 338 are here to stay.
That’s why he recommends:
Reducing tariff risks by diversifying suppliers and considering nearshoring rather than expecting policy changes
Keeping financial and operational flexibility to adapt as tariffs and trade rules change
Using scenario planning to understand potential impacts on costs, margins, and compliance
Check out the full article or follow Michael Keen on LinkedIn for more insights on global trade and business strategy.
Source: Michael Keen (LinkedIn Pulse)
THE FATHER OF ALL DEALS
EU and India’s mother of all deals gave birth to…The Father of All Deals. 😂
Source: The Chart Wizard (X)
MIGHT NEED A LITTLE CHATGPT HELP FOR THIS JOB!
OpenAI is hiring a Trade Compliance Specialist to manage sanctions, export, and import compliance across one of the world’s most-watched AI platforms.
Location: San Francisco | Hybrid (3 days in office) | Remote options in DC, NY, SEA
Salary: $162K – $330K + Equity
Tip: Might want to run your resume on ChatGPT.
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