Canadian Prime Minister Mark Carney said on January 25 that his country has no intention of pursuing a free trade agreement with China, seeking to defuse an escalating confrontation with President Donald Trump after the American leader threatened to impose 100 percent tariffs on all Canadian goods entering the United States.

"We have no intention of doing that with China or any other non-market economy," Carney told reporters in Ottawa ahead of a Liberal caucus meeting. "What we've done with China is to rectify some issues that developed in the last couple of years."

The clarification came one day after Trump issued his tariff threat on Truth Social, warning that "if Governor Carney thinks he is going to make Canada a 'Drop Off Port' for China to send goods and products into the United States, he is sorely mistaken."

Trump's use of the term "governor" reflected his repeated suggestions that Canada should become the 51st U.S. state, a designation he had previously applied to former Prime Minister Justin Trudeau.

Trump's Warning

Trump's social media broadside on January 24 marked a sharp reversal from his initial reaction to Canada's recent trade discussions with Beijing. When Carney traveled to China from January 13 to 17 and reached agreements with Chinese President Xi Jinping, Trump had appeared supportive.

"That's what he should be doing and it's a good thing for him to sign a trade deal," Trump told reporters at the White House on January 16. "If you can get a deal with China, you should do that."

By January 24, however, Trump's tone had changed dramatically. "China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life," he wrote.

In a follow-up post, Trump added, "The last thing the World needs is to have China take over Canada. It's NOT going to happen, or even come close to happening!"

Treasury Secretary Scott Bessent defended the administration's shifted position on January 25, saying Carney had performed "some kind of about-face" on China trade.

"We can't let Canada become an opening that the Chinese pour their cheap goods into the U.S.," Bessent said on ABC's This Week. "We have a USMCA agreement, but based on that, which is going to be renegotiated this summer, and I'm not sure what Prime Minister Carney is doing here, other than trying to virtue-signal to his globalist friends at Davos."

The Canada-China Agreements

The trade arrangements between Canada and China that sparked Trump's ire were more limited in scope than a comprehensive free trade agreement.

During his Beijing visit, Carney reached deals to lower Canadian tariffs on Chinese electric vehicles from 100 percent to 6.1 percent for an initial annual cap of 49,000 vehicles, with the cap growing to approximately 70,000 over five years. In exchange, China agreed to reduce tariffs on Canadian canola from 85 percent to 15 percent.

The tariff adjustments addressed retaliatory measures both countries had implemented in 2024. Canada had mirrored U.S. policy by imposing a 100 percent tariff on Chinese electric vehicles and a 25 percent tariff on steel and aluminum. China had responded with 100 percent import taxes on Canadian canola oil and meal, along with 25 percent duties on pork and seafood.

Carney described the agreements as "going back to the future," noting that the current arrangements included new protections such as the cap on Chinese EV imports that did not exist before 2024.

"It's entirely consistent with USMCA, with our obligations, which we very much respect under USMCA, and will continue to work that way," Carney said.

Dominic LeBlanc, Canada's minister responsible for U.S. trade, emphasized in a statement that "there is no pursuit of a free trade agreement with China. What was achieved was resolution on several important tariff issues."

USMCA Constraints

Carney pointed to commitments under the United States-Mexico-Canada Agreement as a safeguard against broader trade arrangements with Beijing.

The USMCA includes provisions requiring member countries to notify the others before pursuing free trade agreements with non-market economies. The agreement is scheduled for its first mandatory review in July, a process that requires all three countries to agree to continue its terms.

"We have commitments under USMCA not to pursue free trade agreements with non-market economies without prior notification," Carney said.

However, U.S. officials have signaled that Canada's engagement with China could affect the upcoming renegotiations. U.S. Commerce Secretary Howard Lutnick said during the World Economic Forum that Ottawa could risk jeopardizing the USMCA talks by seeking closer relations with Beijing.

Bessent raised similar concerns about the highly integrated nature of North American manufacturing. "The goods can cross across the border during the manufacturing process six times," he said. "And we can't let Canada become an opening that the Chinese pour their cheap goods into the U.S."

Deteriorating Relations

The tariff threat represents the latest escalation in what has become an increasingly contentious relationship between Trump and Carney.

Tensions flared publicly at the World Economic Forum in Davos, Switzerland, where Carney delivered a speech on January 20 criticizing the decline of the rules-based international order and urging "middle powers" to band together. While he did not name Trump or the United States directly, his remarks drew a pointed response.

"Canada lives because of the United States. Remember that, Mark, the next time you make your statements," Trump said during his own Davos address on January 21.

Carney rejected that characterization. "Canada and the United States have built a remarkable partnership in the economy, in security, and in rich cultural exchange," he said. "But Canada doesn't 'live because of the United States.' Canada thrives because we are Canadian."

Trump subsequently revoked Canada's invitation to join his Board of Peace, an initiative designed to oversee Gaza reconstruction and address other international conflicts.

During his China trip, Carney had described the relationship between Ottawa and Beijing as a "strategic partnership" and said progress made "sets us up well for the new world order." U.S. Transport Secretary Sean Duffy warned at the time that Canada "will live to regret the day they let the Chinese Communist Party flood the market with their EVs."

The Canadian Chamber of Commerce called for resolution of the dispute. "We hope the two governments can come to a better understanding quickly that can alleviate further concerns for businesses who face the immediate consequences of torqued up uncertainty," said the organization's Matthew Holmes.

Canada remains shielded from the most severe impacts of Trump's tariffs by the USMCA, but the agreement's upcoming review leaves considerable uncertainty about the future of North American trade relations.