A New Phase of Cooperation Between Canada and South Korea
Just two weeks after announcing a major trade deal with China that drastically reduced import tariffs on electric vehicles, Canada is exploring the possibility of a new key partnership, this time with South Korea. This deal could open the door to expanding automobile manufacturing on Canadian territory.
Although a free trade agreement has been in effect between the two countries since 2015, eliminating duties on most goods, this new Memorandum of Understanding points to a growing interest in deeper cooperation. Both countries are responding to the unpredictability of US trade policy under the Trump administration by diversifying their economic alliances. However, despite all optimistic forecasts, neither has the capacity to replace the United States as the primary economic pillar.
Priority – Strengthening the Positions of the Korean Auto Industry
The current priority is to strengthen South Korea’s presence in Canada’s automotive sector. This could include domestic production of Korean-brand cars, as well as increased production of components for electric vehicles and battery technologies.
This deal will develop our automotive sector, create good jobs, and strengthen Canada’s position as a global leader in manufacturing the vehicles of the future
– said Industry Minister Mélanie Joly.
Link Between the Auto Industry and the Defense Industry
Canada seems to be engaging major Korean automakers like Hyundai, especially against the backdrop of South Korea’s bid to replace Canada’s current submarine fleet. According to media reports, both Hyundai and defense contractor Hanwha are involved in the proposal to build and maintain 12 submarines for the Royal Canadian Navy. If the proposal is accepted, the deal could cost up to 100 billion dollars over the next 30-40 years.
The Hanwha conglomerate has already laid the groundwork by signing five separate memorandums with Canadian companies to integrate their technologies and products into its submarines. Among these agreements is a $275 million commitment to build a new steel rolling plant in Ontario.
South Korea’s Growing Presence in the Canadian Car Market
In 2024, South Korean-made cars accounted for 12 percent of all vehicles sold in Canada, amounting to 228,257 units. In a statement, the Canadian government emphasized its goal of strengthening the domestic battery supply chain by encouraging investment and cooperation in battery manufacturing, materials processing, and the recycling and reprocessing of Canadian critical minerals.
Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, believes now is the perfect time for Canada to bolster its domestic automotive sector by leveraging future defense investments.
Today there are economic reasons to build a plant here in Canada, perhaps to produce electric vehicles… and to build where you sell. Canada is interested in buying submarines, and there are two serious contenders. And both of these contenders have automakers that sell a lot of cars and batteries here
– he noted.
These negotiations are taking place in the context of Canada’s active attempts to attract foreign investment and technology to develop its own high-tech industries, especially in the fields of clean energy and transportation. The success of such cross-sectoral deals, where defense contracts can become a lever for developing civilian manufacturing, demonstrates a new approach to international trade. It also highlights how the geopolitical situation, particularly instability in relations with a main partner, forces countries to seek new, sometimes non-obvious, forms of economic interaction and create long-term strategic alliances that go far beyond classical goods trade.