Canada: Back Door for China Goods Transshipment?
Vietnam’s trade surplus with Canada raises tough questions about CPTPP integrity
By: Khanh Vu Duc
As Canada deepens its engagement in the Indo-Pacific, it finds itself grappling with an uncomfortable economic reality: Vietnam has quietly become one of its most unbalanced trade partners. While celebrated as a success story in the 14-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership signed in 2018 to replace the 16-nation pact voided by US President Donald Trump in 2017, Vietnam’s surging exports to Canada, now exceeding C$14 billion [US$10.25 billion] annually, stand in stark contrast to the meager C$1 billion in Canadian goods sent in return.
This growing imbalance raises not just questions of trade equity, but of transparency, sovereignty, and the health of the very system Canada has worked to uphold: a multilateral, rules-based trade order underpinned by agreements like the CPTPP, as the pact is called. At the heart of the concern is the risk that Vietnam, intentionally or not, is functioning as a transshipment hub for Chinese goods – a back door into CPTPP markets at the expense of Canadian industries. The evidence may not be conclusive, but it is growing. The other members of the trade pact are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and the United Kingdom.
Vietnam: From Partner to Proxy?
Under the “China+1” strategy, global companies have restructured supply chains away from China to reduce political and tariff risks. Vietnam has emerged as a key beneficiary, booming as a low-cost manufacturing base with growing export capacity. But questions about the origin of many of these exports are mounting. US trade officials, particularly under Trump’s second administration, have accused Vietnam of facilitating "transshipment"—where goods made in China are minimally altered, relabeled, and re-exported as Vietnamese to bypass tariffs. Last week, Trump’s team announced new tariffs of up to 40 percent on Vietnamese goods suspected of such practices, while hinting at relief if Hanoi cooperated.
Canada, for now, has avoided such confrontation. But doing so comes at a cost: domestic manufacturers face competition from goods potentially not made under fair conditions or even within CPTPP rules-of-origin guidelines. Worse, the credibility of the entire agreement suffers.
Why This Matters to Canada—and the Region
Canada has committed over C$2.3 billion to its Indo-Pacific Strategy, aiming to deepen security and economic ties with regional partners like Vietnam. But partnerships built on unbalanced trade and questionable practices can quickly sour. It is also in advanced talks on a Canada–ASEAN Free Trade Agreement. If we cannot ensure transparency and enforce origin verification with Vietnam under CPTPP—a legally binding deal—how can we expect to enforce them under a broader ASEAN FTA?
Moreover, if Vietnam continues to act (or be perceived) as a transit zone for Chinese overcapacity, it will erode confidence in Vietnam’s long-term strategic alignment with rules-based partners. That’s not in Vietnam’s interest—or Canada’s.
A Way Forward
None of this is to suggest Canada should pull away from Vietnam. In fact, the opposite is true. The solution is not retreat but rebalancing.
First, Canada should initiate a formal origin verification process under CPTPP rules—targeted, evidence-based, and sector-specific. This isn’t about punitive action; it’s about upholding agreed-upon standards.
Second, a Canada–Vietnam Trusted Trade Corridor should be proposed for high-risk sectors like electronics, garments, and light machinery. This could include real-time customs data sharing, end-use certification, and transparency audits co-managed by both governments.
Third, Canada must boost its own exports. Whether in agri-tech, clean energy, or education, a Canada–Vietnam Trade Action Plan should be launched with the goal of raising exports to at least C$4–5 billion by 2027. Vietnam's emerging middle class represents a real opportunity—if Canadian businesses are supported in accessing it.
Finally, Canada should coordinate with like-minded CPTPP partners—Japan, Australia, the U.S.—to establish regional best practices for rules-of-origin enforcement. Multilateral pressure works best when it’s collective and constructive.
The Bigger Picture
This issue is not simply about trade deficits or tariffs. It’s about credibility. Canada cannot champion a “rules-based Indo-Pacific” while allowing its most promising agreements to be undermined by transshipment loopholes and unchecked imbalances. Likewise, Vietnam must decide whether it wants to be seen as a responsible manufacturing hub—or as a convenient proxy for Chinese overcapacity. If it chooses the former, it will find Canada a willing and long-term partner. At a time when geopolitical alignments are shifting and economic resilience is paramount, both countries must work toward a more transparent, equitable, and genuinely strategic relationship. That starts with telling the truth about trade. And acting on it.