China significantly increased its imports of crude oil and liquefied natural gas (LNG) from Canada in August as it intensifies efforts to diversify energy sources amid geopolitical tensions and ongoing trade disputes. According to customs data released recently, China's crude oil imports from Canada rose nearly 35 percent year-on-year in volume, with the value climbing 64 percent to approximately US$782.3 million. This contrasts with a nearly 23 percent decline in China's total crude oil imports during the same period.

The shift reflects disruptions in Middle Eastern oil supplies resulting from conflicts around the Persian Gulf. Imports of crude oil from six key Middle Eastern countries, including Saudi Arabia, dropped 45.5 percent compared to a year earlier. Meanwhile, imports of Canadian LNG surged by 227 percent in volume compared to August 2018, and the value of sulfur imports from Canada increased by 398 percent, despite relatively modest volume growth.

The increased energy trade with Canada comes amid deteriorating US-Canada trade relations. After the collapse of trade negotiations between Washington and Ottawa in late August, the United States imposed 50 percent tariffs on about US$20 billion worth of Canadian goods. Canada responded with retaliatory tariffs ranging from 15 to 50 percent on more than 700 American products, deepening the trade conflict between the two neighbors. In contrast, China-Canada relations have improved since early 2019, leading to tariff reductions on Chinese electric vehicles and Canadian agricultural goods like canola, as well as expanded cooperation in energy sectors.

Economist Xu Tianchen of the Economist Intelligence Unit noted that China typically capitalizes on fluctuations in oil prices by increasing purchases when prices fall and drawing on reserves when prices rise. Beijing has been systematically expanding its oil stockpiles in recent years, which bolsters its resilience amid price volatility. Xu observed that a brief easing of tensions between the US and Iran in late June and early July allowed China to augment oil purchases that arrived in August, driving the spike in imports from Canada. However, renewed Middle East tensions likely curtailed subsequent Chinese buying.

Russia remains one of China’s largest energy suppliers, with crude oil imports growing 41 percent by volume in August and LNG purchases from Russia rising 43 percent year-on-year. Both imports and exports between China and Russia increased around 40 percent last month, underscoring deepening economic ties partly driven by geopolitical shifts.

Xu characterized Canada as an emerging partner in China’s energy supply diversification, benefiting from improved diplomatic relations under Canadian Prime Minister Justin Trudeau’s administration. With ongoing US-Canada trade friction and Beijing’s strategic push to diversify commodity sources, bilateral trade prospects from 2026 to 2028 appear positive. Nonetheless, Xu cautioned that political developments in China, Canada, and the United States will continue to influence the trajectory of these trade relations.

In addition to energy, China has boosted imports of Canadian agricultural products, with canola imports rising nearly 42 percent in August year-on-year. The value of Canada’s crude oil exports to China also increased 40.2 percent in the first eight months of 2019, indicating a broader trend of growing economic engagement between the two countries amid shifting global trade dynamics.