The Agenda with Steve Paikin (Audio) - What's Driving Canada's China Reset?

Episode Date: October 14, 2026

Canada's relationship with China appears to be entering a new chapter. Lynette Ong, Distinguished Professor of Chinese Politics at the University of Toronto, and Jeff Nankivell, president and CEO of the Asia Pacific Foundation of Canada, examine what's driving closer economic ties and what they could mean for Canada. Then, as Canada cuts tariffs on some Chinese electric vehicles, Moe Kabbara, CEO of the Transition Accelerator, looks at whether greater co-operation with China could create new opportunities for Canadian manufacturing and supply chains.Donate Today : https://tvo.me/See omnystudio.com/listener for privacy information.

What a difference a year can make. When you support TVO, you're helping bring trusted stories, inspiring ideas, and lifelong learning to people across Ontario. And as a thank you, you can receive the 2027 TVO calendar. Filled with beautiful photography from the documentaries and programs your support helps make possible. It's a year-long reminder of the learning, beauty, and discovery your generosity supports. Donate $40 or more to claim yours today at TVO.com slash calendar 2027 and make every month a little more inspiring. You're in bed with the Chinese and playing games with us there. That was White House trade advisor Peter Navarro talking about Canada and the ongoing trade war back in August.

And while Prime Minister Mark Carney probably wouldn't put it quite like that, Canada's looking to China for new economic opportunities. in the face of American trade aggression. Now, when he announced a new agreement during an official visit to the country at the beginning of this year, the Prime Minister put it like this. I believe the progress that we have made in the partnership sets us up well for the new world order.

And there's another sign of closer ties. Next month, Canadian companies will be heading to Shanghai for the China International Import Expo, where Canada will be the guest to. country of honor. So, will our relationship with China continue to grow? And what are the risks and benefits for Canada and for Ontario? I'm Jay and Jugginawavan, and this is the rundown. During the federal leaders debate in April 2025, Mark Carney had a very different message about China. I think the biggest security threat to Canada is China. Now, the two countries are strengthening

economic ties. And the numbers tell the story. Canada's exports to China were up 30 percent. in the first half of this year. Jeff Nankavelle, Lynette Ong. Thank you so much for joining us on the rundown. Jeff, I want to start with you. You've got decades of experience on the ground in China. You have worked as a diplomat under a number of federal Canadian governments. You are now president and CEO at the Asia Pacific Foundation.

So help us understand. How would you describe the progress Canada has made in mending fences with China since Mark Carney became prime minister in March 2025? I would say there's been very significant progress, especially since January with Prime Minister Carney's visit to Beijing. That was really a breakthrough. It was preceded by a short summit meeting that Prime Minister Carney had with President Xi at the APEC summit, the Asia-Pacific Economic Cooperation Summit in Korea at the beginning of November. but the breakthrough really was in January with a number of deals. But I think this is not only about Canada mending fences with China.

I think China has been seeking a better relationship. And so there is motivation on both sides here. Lynette, you are a professor of Chinese politics at the University of Toronto, director of the China Governance Lab at the Monk School of Global Affairs and Public Policy. In a recent paper, you wrote, quote, the stakes in re-engaging China have risen significantly, requiring Canada to navigate a delicate balancing act between Washington and Beijing. Can you elaborate a little bit on that? How does Canada find that balance with both countries? Sure. I think the bilateral relations between Canada and

China in this day and age should really be seen in the context of a triangular relationship with the United States. Whether we like it or not, I think our pivot towards China is really that of a hedging strategy. So you hedge when there's risks. You know, there has been a full out, whatever terms that you want to use, rupture between United States and Canadian relations. So we have to hedge and, you know, like China being a rising power, the second largest trading partner, we need to diversify. So this is very much a diversification strategy as well as hedging strategy. But, you know, our values do not align, and we know that for a long, a long time. But this is also the time to be able to separate political values from economic needs and necessities,

which is why I think there's a balance. Jeff, how do you think the U.S. is viewing Canada's aspirations for more trade with China? Well, I think in Washington, so I think we have to distinguish here the Trump administration, and even within the Trump administration, there's President Trump, and there are the others. I would say the Trump administration is taking a very skeptical view of Canada and other allies of the U.S. having any kind of a rapprochement with China. But it's not necessarily taken from a point of view that the U.S. wants to ensure a solid front for a consistent policy of competing with China, containing China, because the wildcard here, what's really uncertain is where President Trump and his team see the U.S.-China relationship going. So I think one of the risks in this triangular relationship for Canada continues to be that the U.S. tells Canada, you can't do this, you can't do that, and then they go ahead and make their own deal.

And we've seen that previously in the first Trump administration where the U.S. cut bilateral trade deals with China, where China undertook commitments, which were never completely followed through on, but at the time undertook commitments to buy large volumes of U.S. commodities, you know, soybeans and natural gas and metals and other things, some of which would come at the expense of Canada's market share there. So this is a concern that we share with other countries who trade with China is that the U.S. cuts its own deals. But to come back to where we started on this, I think Washington is keeping a close eye on any kind of advancements in trade agreements or relationships between Canada and China. Lynette, does Canada want a free trade deal with China? I think Prime Minister Carney has ruled that out if I'm right.

But as Jeff as mentioned, I think we need to separate the Trump administration from previous U.S. administration. I think the concern is that Beijing may use closer ties with Canada as a backdoor to enter into North American market in violation of U.S. But the fact of the matter is that the tariffs that United States have imposed on Canada, that is already in violation of whatever trade agreements they are out there, right? And just a couple of weeks ago, you know, when prison in prison, this is Washington, D.C., the red carpet, the nervousness on President Trump, the sort of, you know, she-row treatment that he has extended to presidency versus other allies, including Canada, it's very inconsistent.

So there's a lot of hypocrisy there and a lot of inconsistency. So I would think from other words perspective, we should just go ahead and do what we think is in our best interest. Jeff, let's expand a little bit on that. You know, this China is our second biggest trading partner. So naturally, one would think that perhaps a free trade deal is in the play there. why would Canada want one or why wouldn't it? I don't think Canada.

I don't see any indication that the government of Canada today is seeking comprehensive free trade agreement with China. If something like that were to come, the most likely avenue would be if there were some eventual agreement for China to join the Trans-Pacific Partnership, of which Canada is a founding member, now known as the Comprehensive and Progressive Trans-Pacific Partnership, which is now 12 countries, including countries in Southeast Asia, Japan, Australia, and most recently the United Kingdom,

the first country, non-Pacific bordering country to join that agreement. That would be a more likely vehicle. The Prime Minister Carney's government has made it clear that there are certain lanes, in that Canada-China Expressway that are off, that are going to be off limits in areas related to defense and security and advanced technologies around AI and quantum, just to give a few examples. So I don't think there's an aspiration or a plan to seek a free trade agreement,

but at the same time, there is definitely a hope and a plan to get sectoral understandings in areas like agri-food, where Canada got some tariff relief in January, but really it's only brought us partway back to where we were a few years ago, before we had, you know, tit for tariffs. Canada put 100% tariffs on Chinese EVs a couple of years ago. China responded with punitive tariffs.

on a number of Canadian agri-food products. Some of those tariffs were reduced on a temporary basis at the time of Prime Minister Carney's visit in January, but only to the end of this year. So it's a major Canadian objective in the short term is to get extension for that tariff relief. Secondly, to expand the coverage. For instance, canola seeds are at a relevant

a relatively low tariff now, but there are other variants of canola products that still face high tariffs. So to get expanded tariff relief across the board for agri-food products, and then longer-term to find some way to get stronger assurance from Beijing that these kinds of arbitrary measures will not be imposed in the future. But I think you'll see that pursued more on a sector-by-sector basis than as a comprehensive trade agreement. Lynette, I'll get you to respond quickly to that. We will talk a little bit about sectoral shares of China's foreign direct investments, but I'll get you to respond there.

Yeah, so I think, you know, every food has been traditionally our biggest exports to China. But I think we also have a lot to gain in terms of collaboration and trade cooperation in terms of clean technology and potentially energy like LNG. So we have allowed 49,000 electric vehicles from China to come in, with the understanding that in the next couple of years, we'll be looking at joint ventures with Chinese automobile companies. That is controversial. People are worried about security risk.

But I think, you know, if you can guarantee that jobs will be created in Canada and they'll be transferring some technology over, I think this is something to think about. Of course, Washington, B.C. is concerned about potential backdoor automobile into North American market. But, you know, I think this is a sector that could potentially benefit our consumers. And overall, the numbers is very small in terms of the overall percentage of our automobile industry. All right. Well, Jeff, I want to cut in here because Lynette brings up security,

and that's a big conversation that we need to talk. talking about it wasn't that long ago that Mark Carney called China the biggest security and geopolitical threat. And here we are in 2026 talking about trade deals. So help me understand what are the domestic and external risks of a closer economic and trade relationship with China? Well, before I come to that, I just wanted to jump in on the sort of export picture. I mentioned, you know, Canada is looking to open up and get more assurances on agri-food. But now the leading export sector for Canada is energy,

and particularly crude oil is the most valuable part of that. And that's an emerging story. Maybe we can come back to that. And on the EVs, I think this is an area where Canada, Ottawa will have to move very carefully and very deliberately to see exactly, to really set some very firm rules, and expectations and to have a kind of regime to monitor if there is investment coming in from China in the sector and as may be part of a deal for expanded access above the low level of access

that's now coming in at a low tariff for Chinese EVs, that's going to need to be managed and policed very carefully because the record in other parts of the world of these kinds of investments doesn't paint a clear picture of domestic benefits. Lynette, give us a big picture here of China's economy right now. How healthy is its economy? Well, certain sector, high-tech sector, export-led industries are doing very well. But overall, the economy is still in Dodrum because the real estate-related sectors typically account for 30% of GDP.

That is still in recession because of the collapse of Evergrand a couple of years ago. and because of Xi Jinping's three red lines back in 2020, which put a break on the sector dramatically. So given that, the implication on Canada is that they want to continue to drive the export-led growth. Canada is, of course, and, you know, is a relatively small market, but it could potentially open the door to North America and other places. But I want to come back to security risks.

I think the government is very aware of national security risks. It has ruled out cooperation on the military front and security exchanges, for instance. I think the harm done on Canadian people on Canadian soil, I think the risk is real. We have commissioned report on foreign interference. I think there are instances of transnational repression, evidence on that. is very difficult to come by. But I think their risk of transnational repression is in a way independent of trade. I think that is a product or there's relationship between the degree of the number of Chinese diaspora in the country.

So whether or not we trade with China, we are going to face that risk. Because there's a large number of Chinese diaspora living in Canada. They're Chinese fugitives in Canada, and therefore the governor wants to extend its long arm into Canadian soil. I think we should separate that from trade, cooperation, and economic relationships, because they are really two different equations. Jeff? Yeah, and I would agree with that assessment. In terms of the overall relationship, it is a significant issue that needs to be managed. But I think there are ways of doing that in an overall relationship in which we can grow trade and investment in engagement, which is definitely in the interests of Canadians.

And we look at the imperative that we have in Canada to diversify our trade beyond the United States. You can't ignore the world's second largest economy. And although the consumer demand is sluggish these days in China, as Lynette said, there's sectors of the economy that have slowed down and Chinese owners of properties have seen their wealth decline. It is still the world's second largest economy, and it's a manufacturing powerhouse, and it will continue to need all kinds of imports, of goods and also services. We haven't talked about financial services where Canadian companies.

companies have a prominent role and lots of upside potential. So there's, there's different dimensions to their relationship. Well, very quickly, Jeff, I actually do want to pull up a quick chart, because I did promise of the sectoral share of China's foreign direct investment in Canada. Basically breaks down China's Canadian asset portfolio. As you mentioned, 45% of its investments here in oil and gas, as you mentioned, 30% in management of companies. Less than 10% is in finance and insurance, as you mentioned, less than 5% each in mining, technology, manufacturing, and the rest. Lynette, help me understand here. Is there any chance we will see China investing in any of Carney's major project priorities?

See oil and gas there? That is one that has been sort of pulled the side here with this government. There's a lot of infrastructure projects on that list, on that potential list there. Do we see China getting involved in some of those major projects? Well, I think if I'm sitting in Ottawa, I'm. I would think the Prime Minister wants to keep China out of projects that would pose, might pose potential security risk to Canada. One sector that I think may be receptive to a Chinese capital would be infrastructure

building. The Chinese are very good at building infrastructure. They have got a lot of experience doing that not only domestically, but around the world. A lot of the BRI projects are also infrastructure-based. So on that front, I think they might be able to help us, and we might be able to work with them in terms of infrastructure construction, which is one of the main priorities of Prime Minister Kearney in terms of stimulating the economy.

Jeff, you got the last word here. We had the announcement of the LNG Canada II project. This is a liquid, liquefied natural gas export facility in Kittamat, the largest private sector investment in Canadian history. It was a major announcement, Petro China, Chinese company is one of the partners in that. They're a minority, they have a minority stake, but they, so just one of these nation building announcements that was made just in the past week involves new investment on the scale of billions of dollars, new investment, almost all of it is coming from Asia and a share of that

is coming from China. And so I think there is a good fit between China's energy demand needs and Canada's increasing ability to supply, both liquefied natural gas, other petroleum products and crude oil in increasing quantities. And while we should aim to diversify the customer base beyond China for those products, and that is happening, we need more of that. But there is a good fit there. So I think you will see Chinese investment welcomed on aspects of the energy sector. And this is something that we need. A story we will continue to follow.

Jeff, Lynette, thank you so much. Thanks for having. Yeah, thank you. So as we just heard, one of those new agreements with China involves cutting tariffs on up to 49,000 Chinese EVs. Could more cooperation between the two countries actually open up opportunities to support Canadian manufacturing and supply chains? Mo Cabara, welcome to the rundown. How are you doing? I'm doing a little. Thank you for having me. You are the CEO of the Transition Accelerator, a Canadian think tank focused on electrification and clean energy.

Now, aside from affordability and consumer choice, help us understand what are the opportunities over the long term if Canada, is allowing Chinese EVs to be sold here? Yeah, I mean, that's a great question. When we look at the deal that the government struck with the Chinese last year, essentially allowing 49,000 vehicles, a big part of that was what I would call using market access as a leverage point for industrial policy and industrial strategy vis-à-vis the Chinese automakers.

So I think the reality is that Chinese have developed their technology and the sort of product line in a very accelerated way. If we look at Chinese auto makers and the Chinese auto exports broadly, not just electric vehicles, but more broadly. So that's just kind of contextualize where their position is. 2020, they sold outside of China a million vehicles. Last year, they sold 7 million vehicles in 2025. This year to date in August, it was 7.5 something.

They're expected to reach 10 million vehicles by the end of the year. So that's a 10x increase in exports from 2020, right? So what that means is that there is a very difficult situation that we're facing in terms of how the Chinese automakers have positioned themselves from a global automotive perspective. But then when we add on top of that, there are technological advancements on things like batteries and electric motors and electric vehicles. The question then becomes, well, what is really our position when it comes to auto manufacturing over the long term? And then structuring this access to our market with essentially with it being a leverage point to have some sort of manufacturing and investments in Canada, I think is the ultimate goal for this.

So it's not just an affordability piece. I think that's part of it. But if we do that at the expense of our own sector and at the expense of our own manufacturing and industrial base, then I think that's going to be a mistake, which is why I'm supportive of this sort of what I would call selective exposure. We didn't just let them flood the markets, but then creating market access for actual investments. And we can talk about what those things could look like and how to, you know, structure them. Well, let's talk about those opportunities, supply chains. You know, what would a Canadian supply chain look like?

And could existing Canadian part suppliers benefit from that? Yeah. So, I mean, if we look at Cherry, which is, you know, one of the companies, They've sort of proclaimed this in recent months that they're looking at this new era of joint ventures and positive sum competition. So what does that look like? Well, if we look at what they've done in other jurisdictions,

we've seen them, you know, structure joint ventures. And I think there are different models where we have, some companies have, you know, full control of the supply chain and they come to those markets, and they don't really integrate with the existing supply chains and parts manufacturers in those markets. Some kind of license their technology,

some buy equity stakes and develop joint ventures. Like G-Le, for example, there's a Spanish plant with Ford that they've structured a joint venture where they've taken 30-some percent equity and Ford retains 66%. So I think ultimately the exact structure, there are different models, but if you can do it in a way where I would call a positive of some cooperation where we get something, they get something, and we can integrate it into our

supply chains. The mistake would be, for example, doing something like knock down assembly, right? So they bring all the parts that's sort of like a Lego kit and they assemble it in the jurisdiction. You don't get the value add and the economic multipliers into the broader parts manufacturing supply chain if you go after that model. So I think a part of what we're trying to figure out is, you know, what are the levers that we have, you know, vis-a-vis market access and what we can offer, and how do we kind of maximize the opportunity for Canada and the Canadian auto sector as it exists to help,

you know, secure the future of the auto sector, given that it's such an important part of our economy, especially in Ontario. I want to talk a little bit more about the opportunities, particularly with electric batteries. I think a lot of excitement in terms of what not only Canada, but the province of Ontario can do there. How can Canada best build out the supply chain for electric batteries, and what exactly would that look like? Yeah, I mean, I think what we've seen in Ontario, specifically with the two battery cell manufacturing plants, so the next star and the power coal by VW is a great start.

It's actually quite impressive. The opportunity then becomes, what is the value at in the supply chain? So that's why I've seen things like the Cato manufacturing in Quebec, integrating that, and then upstream from that, the lithium processing and then lithium mining. So I think when we think about the battery, supply chain is trying to understand where can Canada actually play and what leverage do we have? I think access to our critical minerals becomes a leverage point, especially when you can

use it to secure vertical integration from mining, processing, cathode, and cells, which is really the name of the game when it comes to reducing costs, right? So if you're able to actually get vertical integration done and something that can happen in Canada because we have access to their materials, that is something that will unlock a lot of opportunities and potential for direct investments and help grow Canadian companies as well with Canadian IP. So I think the opportunity on batteries is still quite nascent, relatively speaking,

but we've grown it significantly since, you know, when we started this conversation around 2018, and the Ontario government has been quite committed to this as well because it recognizes that's where the world is headed, And we can still make internal combustion engines in the near and medium term, but recognizing that, you know, overall, the market's going to go to electrification because it's the more efficient technology. And what powers an electric vehicle is a battery.

And that's where most of the value is. All right. I want to move from hardware to software. You talked about Canadian companies. Let's talk Blackberry. Their software is installed in about 250 million cars around the world, including Chinese EVs. What role could Blackberry play here if China wanted even greater access to that Canadian market?

I think there's a great role to what we've called sort of Canadian software on Chinese hardware as a way to kind of mitigate some of the concerns related to cybersecurity. And I think I'm not one of the people that completely dismisses those concerns, but I'm also not one of the people that says, you know, we're going to plug in a Chinese EV and it's going to blow up the grid the minute you plug it into your socket.

So I think there's a spectrum there in terms of being completely dismissive and then being, you know, on the other side, where I've called the sort of apocalyptic sense of the risk. And I think to actually treat the risks with respect and treat the risk with the vigilance means that, hey, there's an opportunity to actually secure the supply chain

and secure what these products are going to, how they're going to operate in Canadian markets by leveraging Canadian software, which we have more control over, more visibility over in terms of the company and Blackberry being one that is mature. It's a world leader in the space. So I think not only is it something where it does actually add to the economic activity in Canada

by growing companies like BlackBerry, but it has the actual advantage of helping us on the security front as well. Mokabara, we're going to have to leave it there. Really appreciate your insights on this. Thank you so much. Of course, yeah. Happy to chat. Thank you.

Do you think Canada, should be pursuing closer ties with China. Do the benefits outweigh the risks? Let us know in the comments or send an email to rundown at tbO.org. Until then, I will see you tomorrow. Starting this year, grade 10 students must complete the financial literacy graduation requirement to earn their Ontario secondary school diploma. Need a little help getting started? TVO learn is here for students, teachers, and families. Explore free curriculum-connected resources developed by Ontario certified teachers. You'll find engaging lessons, activities, and tools designed to build confidence, strengthen financial literacy skills, and support student success. Get everything you need free at TVOlearn.com.