Edition 05: What the heat-up in the China-U.S. trade dispute could mean for Canada, how Chinese recycling restrictions continue to impact Canadian communities, and how the future of Chinese agriculture may be in self-driving combines. Read more…

Quote of the week:

“But always in the background [this week] was China – its growing power in the world and its increasingly confrontational relationship with the U.S.” — Mark Gongloff, Bloomberg

One Big Story: U.S.-China trade dispute is now official

• On Friday, the American government announced that it was going to move ahead with imposing $50 billion in tariffs against Chinese products, despite several weeks of negotiations between the two countries trying to head off the trade war before it began.

• Tariffs on about $34 billion of Chinese products will go into effect July 6; tariffs on another $16 billion will go into effect after this, once the list of items has been determined.

• Almost immediately, China announced it would retaliate at an equivalent rate and intensity; President Trump threatened to further increase U.S. tariffs if China retaliates.

What does this mean?

• For starters, July looks like it’s going to be an ugly month on the trade front. Not only are U.S.-China tariffs going to go into effect, but so will Canadian and a host of other country tariffs against the U.S. (in response to steel and aluminum tariffs). The trade dispute between China and the U.S. will have global ramifications for trade – and will be particularly bad for Canada.

• Disputes between the U.S. and China, Canada’s first and second largest trading partners respectively, will affect the Canadian government’s attempt to broach further trade with China on a number of fronts, from foreign investment to negotiating a trade agreement. The Americans have made clear their worries about China using Canada as a back door to access the U.S. market and technology. How this plays out in the longer term is critical to bear in mind as we watch the unfolding drama between the two global giants, especially if either (or both) sides tries to make Canada a proxy for the issues between them.

• From the Globe and Mail, an analysis of the best and worst case scenarios for what will happen to the global economy after the tariffs.

• From the South China Morning Post, an analysis of how Canada must tread carefully with China now: “Canada had shown signs of wanting to reduce its reliance on the US by reaching out to China… but analyst now say it must tread carefully or risk further damage to its already strained relations with the US.”

• Perhaps an early example of how this could get sticky: senior American lawmakers have warned the Canadian government that Huawei is a national security threat to Canada – and its national security allies (including the U.S.).

Bottom Line:

Canada’s relationships with its two largest trading partners are about to get more complicated

This week on the noise-o-meter…

The last couple weeks have seen considerably less reporting on the West and China than usual – likely because the news cycle has been dominated by the recent U.S.-Canada trade spat. In British Columbia, news focused largely on the latest developments in the China-U.S. trade dispute, as well as on how the recycling restrictions China implemented last year continues to have an impact. Articles discussing Alberta and China focused on the recycling restrictions, and on the potential for Trans Mountain to transport oil to China. Saskatchewan and Manitoba focused on the China-U.S. trade dispute, among other stories.

Stories from the West

• From CBC, a look at how Strathcona County has had to adjust its recycling programs due to China’s restrictions on recycling imports. This is a development that could have a long-term adverse impact on everything from municipal budgets to Canadian companies that have grown in booming domestic recycling space. Calgary is also affected by the changes. It had to find space for 5,000 tonnes of material it could no longer send to China (see CBC as well).

• From CNBC, a look at how the Trans Mountain pipeline could increase Alberta’s oil exports to Asian countries, especially China.

• From the Asia Pacific Foundation of Canada, information about a new business incubator in Edmonton that will facilitate access for Alberta technology innovators in China.

• Finally, from The Canadian Press, a story about the Air Canada’s new partnership with Air China – and if that had anything to do with the “Chinese” designation for Taipei on Air Canada’s website.

Issues that Matter

Trade and Investment

• At the end of the month, Minister of Small Business and Tourism Bardish Chagger will lead a delegation of tourism companies, as well as provincial and territorial ministers, to China.

• An op-ed from the Financial Post argues that American tariffs against steel and aluminum imports from Canada will help China, while they hurt Canada.

• Chinese companies are struggling to keep up with the ever-rising censorship demands from the Chinese government – failure to comply with these changing demands can result in the death of a company.

• In May, McKinsey released a deep dive into China’s value chain, and explained why moving through the value chain in China happens so much more quickly than other countries.

• An op-ed in the Hill Times argues that now is the time for free trade with China.

Agriculture

• Among the tariffs that China fired back at the U.S. were several agriculture commodities – including some that are produced in Canada, such as soybeans.

• Tech companies in China are getting into farming, the most recent of which is Alibaba. This has the potential to dramatically increase Chinese crop production.

• From China’s state media – a look at how self-driving combines are the future of agriculture in China.

• The Chinese Consul General was in Lethbridge last week, talking about agriculture.

• Chinese agricultural universities have been getting interested in 4-H. (As a former 4-Her, this is pretty cool!)

Clean Energy & Natural Resources

• China has, to the surprise of many, put the brakes on its solar program.

• China consumes a lot of energy – which, for China, is both a good and bad thing.

• For a climate action partner, European countries are increasingly looking to China – instead of the United States.

By the Numbers

Data Source: Quartz Cultural power is something I find fascinating – and, in this particular view of culture, it is clear that China is beginning to flex its own muscle in the movie business. Many of the films that top China’s box-office list are ultra-patriotic action flicks, like Wolf Warrior II.

Interesting Tidbits

• The Economist is running a debate on China, specifically: “Should the West worry about the threat to liberal values posed by China’s rise?” Highly recommend it if you’re interested in deep-dive arguments on the issue.

That’s all for today! Questions, comments? Send them my way! – Sarah Pittman, policy analyst

The China Brief is a compilation of stories and links related to China and its relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates. [i] Media measurement is provided by a third-party, independent media monitoring service. To be included in the noise-o-meter, “China” must be in the title, and one of the four western provinces somewhere in the article. While not a perfect system, this gives us an idea of how much China and the West are being discussed together.