Davos 2026: Canada’s Carney pivots to China

Canadian Prime Minister Mark Carney delivered a striking speech at the World Economic Forum in Davos, Switzerland, declaring that the international economic system that was designed by western powers is now broken and that there is no going back.

The speech capped off a series of moves that Carney has made to pivot away from the U.S. and seek deeper ties elsewhere, most recently with China.

Carney said Canada and other middle powers went along with the “international rules-based order” knowing that it was “partially false,” admitting that the most powerful countries made exceptions for themselves from the rule of law when it suited them. He said Canada received benefits from that system, but now the costs of going along are no longer worth it.

“This bargain no longer works. Let me be direct. We are in the midst of a rupture, not a transition,” Carney said. “Over the past two decades, a series of crises in finance, health, energy and geopolitics have laid bare the risks of extreme global integration.”

“But more recently, great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited.”

He elaborated on a series of deals that he has made in the past year to diversify Canada’s economy away from U.S. dependence.

On the energy front, much of what Carney has done since he was elected was to weaken Canada’s climate policies and promote the oil and gas industry. Under the logic of connecting fossil fuel exports to markets beyond the United States, Carney has streamlined permitting of energy infrastructure, scrapped the oil and gas emissions cap, delayed cuts to methane emissions, suspended clean electricity standards in Alberta, and prioritised long-distance gas and crude oil pipelines to the Pacific Coast.

That approach has continued into 2026 as the geopolitical logic has taken on even more importance following U.S. imperial adventures in Venezuela and Greenland.

A week prior to Carney’s Davos speech, the Canadian leader travelled to Beijing to meet with China’s Xi Jingping. The two sides announced a “strategic partnership,” and agreed to a framework to explore energy deals, including on oil, gas, nuclear, and clean tech. While the agreement was relatively narrow, relations between the two countries are now at their warmest in years.

“They desire to have more of our energy,” Natural Resources Minister Tim Hodgson told reporters in Beijing. “As long as they’re a responsible producer, we’re open to more investment from China.”

Chinese refiners are scrambling to find a replacement for lost Venezuelan oil flows, as Bloomberg reports, and some refiners are seeking out cargoes from Canada, which produces a similar heavy sour type of crude. China stepped up imports from Canada when the TMX pipeline was completed in 2024, a long-distance conduit that runs from Alberta to the Pacific Coast. Canadian oil exports to China are up 84 percent year-on-year, according to Bloomberg data.

The Canadian government sees higher oil exports to China as a hedge against U.S. dependence. As it stands, roughly 90 percent of Canada’s oil exports go to its southern neighbour.

In fact, the recent U.S. seizure of Venezuela could result in fresh momentum for a new proposed oil pipeline in western Canada, although the project still faces opposition, high costs, and steep odds.

LNG has also been a top priority for Ottawa. The nation’s first major export terminal, LNG Canada, has begun shipments to Asia, but the plant has been dogged by operational problems and excessive flaring. Shell and Mitsubishi are each looking to sell part of their stakes in LNG Canada to other buyers.

The hype around Canadian LNG has diminished somewhat compared to a few years ago. Other projects in Canada are trying to move forward at a time when the market has flipped from shortage to surplus. The prominent LNG price markers in Asia (JKM) and Europe (TTF) have fallen sharply in the past year as global supply has swelled. One proposed LNG project on the U.S. Gulf Coast was suspended a few weeks ago because of souring market conditions.

For the next several years, profitability will be squeezed, raising red flags and varying degrees of stranded asset risk for Canada’s west coast LNG projects, including Ksi Lisims LNG, Cedar LNG, Woodfibre LNG, and both Phase 1 and Phase 2 of LNG Canada.   

Canada opens door to Chinese EVs

Meanwhile, Carney also cut deals with China that could boost clean tech.

The two countries announced a splashy deal on EVs that includes dropping Canada’s 100 percent tariff on Chinese EVs down to just 6 percent. In exchange, China slashed tariffs on Canadian agricultural products. For now, Canada will limit EV imports from China to just 49,000 vehicles, a figure that will grow to 70,000 over five years. 

China now dominates the global EV market, producing both high-end and cheap (but high quality) EVs. Tariffs have effectively prohibited Chinese EV sales in the U.S., but Canada has now opened the door to the likes of BYD and Geely, two Chinese EV giants.

The deal is notable given that Canada has long tied its auto industry and auto regulations to the U.S. market. Canada had placed tariffs on Chinese EVs in part because it takes its cues from Washington. As a result, charting a new course on auto sector policy and also embracing Chinese cars is doubly significant.

“A more stable economic and diplomatic relationship with China, including lowering EV tariffs (which put Canada at odds with both U.S. and Mexican policy), may be a message to the Americans that we have options and some leverage to withstand some of the more outlandish demands we expect from the CUSMA review,” Stuart Trew, director of the trade and investment research project at the Canadian Centre for Policy Alternatives (CCPA), a non-partisan research institute based in Ottawa, wrote in a brief. CUSMA is the Canada-U.S.-Mexico trade agreement, formerly known as NAFTA. The free trade deal is up for renegotiation later this year.

But Trew added that it’s not clear how far Carney will go in breaking from the U.S. “Or it could prove a short-lived reprieve if the Carney government agrees to harmonize international trade policy under a more tightly controlled (from Washington) Fortress North America—a very real possibility.”

The Trump administration took notice of Canada’s recent moves. United States Trade Representative Jamieson Greer called Canada’s decision to lower EV tariffs “problematic.” U.S. Secretary of Transportation Sean Duffy said Canada will “surely regret” bringing Chinese cars into their market.

Canadian labour groups agree. They argue that China’s state-subsidised auto market will undercut Canadian competitiveness and result in job losses.

“These companies are counting on being able to import to Canada without building here,” Lana Payne, national president of Unifor, Canada’s largest private sector union, told members at a Local 222 information session. “That’s why every recommendation, every word, every conversation with government has come back to one core principle of any Canadian auto policy: if you want to sell here, you need to build here.”

It remains to be seen if BYD will set up factories in Ontario, for instance. Carney suggested that after the initial agreement to bring in Chinese EVs, investment in such factories will follow.

“It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain,” Carney’s office said in a statement.

For Trew at CCPA, strategic partnership with China still relies heavily on exporting fossil fuels to China, which won’t do much for the Canadian economy. 

“Canada’s exports to China are heavily weighted toward raw materials (iron ore, coal, canola seeds) and our imports weighted toward high-tech goods, including automobiles,” Trew said.

“We may be able to double these exports with the help of oil and gas, but this is not a strategy for economic sustainability or good job promotion in the long-term,” he added.

(Writing by Nick Cunningham; editing by Sophie Davies)