Ontario Premier Doug Ford’s call to ban Chinese software from vehicles, aligning with U.S. policies aimed at protecting national security, opens a debate on the economic risks of limiting trade with China. While security concerns are valid, Canada’s economic relationship with China—its second-largest trading partner—plays a role that is too important to be compromised for short-term protectionism. Canada needs to maintain a careful balance: supporting its North American allies while nurturing a crucial trade partnership with China.
The Canada-U.S. trade relationship is critical. Approximately 75 percent of Canada’s exports go to the U.S., which remains Canada’s largest trading partner by a significant margin. Shared infrastructure, industries, and military defense agreements, such as NORAD, highlight the deep ties between the two nations. Canada’s geographic proximity and political alignment with the U.S. have made the United States an indispensable partner in trade and security.
The U.S. is also a critical player in North American defense strategies and cybersecurity measures. Collaboration between Canada and the U.S. on initiatives like the Five Eyes intelligence-sharing alliance reflects the importance of security cooperation. From protecting critical infrastructure to combating global terrorism, Canada relies on the U.S. for intelligence, security, and trade.
However, Canada’s reliance on the U.S. can come at a cost. American policy is often driven by its own interests, and the U.S. frequently uses its economic leverage to pursue protectionist measures that can hurt Canada and other allies. For example, U.S. tariffs on Canadian softwood lumber, despite multiple WTO rulings in favor of Canada, have cost billions in lost revenue and jobs.
Gwyn Morgan is a retired business leader who has been a director of five global corporations. In a recent op-ed in the Financial Post, he cautioned against the imposition of a 100 percent tariff on the import of Chinese electric vehicles (EVs), noting the risks of mimicking American policy without considering the unique circumstances in Canada.
Morgan highlights the repercussions of such policies, particularly the potential impact on Canadian agriculture. Following Canada’s tariff announcement, China initiated an anti-dumping investigation into Canadian canola exports—an industry that relies heavily on Chinese demand. With China being the largest buyer of Canadian canola, such retaliatory measures could spell disaster for farmers, much like the previous canola import block that resulted in losses of around $2 billion.
Canada must walk a fine line between maintaining strong U.S. relations and ensuring its own economic independence. China’s influence in global trade is undeniable, and Canada’s economy benefits significantly from this relationship. Exports to China were approximately $28 billion in 2022, with agriculture and natural resources being the primary beneficiaries. In 2023 alone, canola exports generated $3.8 billion in trade with China, supporting thousands of Canadian farmers and rural communities.
The push to ban Chinese software in vehicles is part of a broader North American strategy to protect the domestic EV industry from competition. However, protectionist policies are a double-edged sword. China dominates the global supply chain for electric vehicles, producing over 60 percent of the world’s lithium-ion batteries, which are essential for EV production. By cutting off access to Chinese innovation and supply chains, Canada risks increasing production costs for EV manufacturers, stifling competitiveness, and slowing the adoption of green technology in North America.
Morgan asserts that this approach risks overlooking the realities of Canada’s own auto sector, which currently produces no EVs. Instead of imposing blanket bans, Canada should consider collaborative ventures with Chinese firms, allowing Canadian manufacturers to access better technology and remain competitive. Protectionism may provoke retaliatory measures from China, affecting not only the automotive industry but also crucial sectors like agriculture and energy.
Wendy Dobson, Professor Emerita at the University of Toronto’s Rotman School of Management, maintains that Canada needs to pursue smart diplomacy, engaging with China without abandoning its alliances. Dobson asserts, “Canada has the potential to benefit from China’s rise,” provided it navigates its relationships wisely.
As Morgan emphasizes, this balancing act is vital; policies that endanger Canadian farmers in favour of industries with no established footing—like the domestic EV sector—only jeopardize our economic stability. Encouraging a robust agricultural workforce while pursuing diversified trade can safeguard against the harmful effects of U.S. protectionism and geopolitical tensions.
It is in Canada’s interest to strengthen ties with multiple global markets to insulate itself from the effects of protectionism and conflicts. A strategy of engaging China on mutually beneficial terms while safeguarding our relationship with our American neighbours is the way forward in an increasingly interconnected global economy.
Premier Ford’s call to ban Chinese software may resonate with some who prioritize security, but it overlooks the broader economic and diplomatic implications for Canada. As China continues to play an outsized role in Canada’s trade portfolio, maintaining strong relations with Beijing is critical for sectors like agriculture, natural resources, and automotive manufacturing. Balancing these interests will be key to ensuring Canada’s economic resilience in the face of complex global dynamics.
