Trade Partner Profile: China
In 2024, Canada exported $30 billion of products to China and imported $87 billion. China is Canada’s second largest trading partner, a long distance behind the United States.
- Canada’s trade deficit with China has increased steadily over the last two decades, swelling from $22 billion in 2005 to $57 billion in 2024.
- Canada’s principal exports to China consist of raw commodities, including metals, minerals and agricultural products. Meanwhile, China principally exports manufactured products to Canada consisting of a mixture of intermediate goods and finished consumer products.
- Trade tensions between Canada and China have persisted for years, driven by diplomatic, security, and economic disputes. These disputes have held back the trading relationship and dampened the potential that China’s large and growing market provides to Canadian businesses.
China in transition
- Energy and mineral exports account for roughly a third of exports to China. Another third is made up of agricultural, wood pulp and aquatic products.
- Coal and petroleum oil are the primary energy products exported to China, though together these account for only a small fraction of China’s total energy imports. Instead, Russia, Malaysia, Iraq and several Gulf states are China’s principal international energy suppliers.
- Looking ahead, slowing population growth will weigh on household energy demand, while a shift away from primary sectors is expected to constrain industrial energy demand. At the same time, China will see the share of renewables and natural gas in its energy mix increase.
- Meanwhile, iron ore, a vital input for steel manufacturing, and copper ore account for the lion’s share of mineral exports to China. However, Canadian exports represent a relatively small share of China’s mineral imports when compared to other exporters including Australia and Brazil.
- China’s demand for Canadian iron ore has declined due to reduced steel production, impacted by a weak housing market, stricter environmental rules, and deindustrialization. While exports to growing markets like India and Nigeria may rise, they’re unlikely to offset China’s slowdown, meaning Canadian iron ore exports will likely decrease gradually.
- Exports of Canadian copper ore to China has been increasing, fuelled by rising demand for copper, which is widely used in in several emerging technologies, most notably electric vehicles. Demand for Canadian copper ore is expected to remain strong particularly given concerns about the supply capacity among other key producers including Chile, Peru and the Democratic Republic of Congo.
- Canada exports large amounts of agricultural and aquatic products to China. The imposition by China of 100 per cent tariffs on Canadian canola and dry pea exports will be most keenly felt among the provinces of Alberta, Saskatchewan and Manitoba. China’s consistent use of agricultural tariffs makes the country an unreliable export destination for these goods, but the market remains large, and a potential area of growth if trading relations improve.
A look ahead
- Canada’s trade with China continues to be hampered by the adversarial relationship between the two countries. Tariffs on Canadian goods, particularly agricultural products will reduce the competitiveness of these products and likely see Chinese buyers seek out alternative sellers, such as Russia. However, if trade relations can be stabilized or insulated from political tensions, China’s economic growth presents a valuable export opportunity for Canada in the near-term.
- The ongoing structural transition of China’s economy will have important implications for trade with Canada over the long-term. A shift from primary manufacturing towards services and hi-tech industries will see demand from raw materials and commodities in China moderate. Additionally, China’s population is ageing and expected to shrink in the years ahead, which will gradually weigh on demand for intermediate goods used in residential construction and food manufacturing, including oil seeds, animal feed and cereals.
- Despite ongoing economic shifts, China—still the world’s second-largest economy—will continue to be a key export market for Canada. As U.S.–China trade tensions deepen and their economies decouple, Canada has an opportunity to fill gaps left by the U.S. For instance, Canadian crude oil exports to China have recently surged with Chinese imports of U.S. crude declining sharply.
- Trade is the key battleground in the diplomatic tensions between Canada and China. Looking ahead, Canada’s supply of several strategic minerals will become increasingly important especially as the U.S. looks to develop a reliable supply outside the control of China, which currently dominates that market for critical minerals and appears willing to restrict exports of these products to the United States.
Chart 1
What Canada Exports to China
($ CAD Billions)
Sources: U.N. Comtrade, The Conference Board of Canada
Chart 1
What China Imports from the World
($ US, billions)
Notes: Bars highlighted in red indicate export opportunities for Canada.
Sources: U.N. Comtrade, The Conference Board of Canada
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