The Canadian and Chinese governments came to a deal that includes both countries significantly reducing tariffs on each other’s exports.
49,000 units represent less than 3% of all new vehicles sold in the country last year.
Prime Minister Mark Carney said that there is a possibility Chinese automakers will open a factory in Canada.
After months of public and political pressure, the Canadian government came to a deal with China that will see both countries reduce their tariffs on each other’s exports.
This means that in exchange for a reduction in tariffs on canola and seafood products, Ottawa will allow up to 49,000 Chinese electric vehicles per year on the Canadian auto market.
Back in 2024, the previous Liberal government under Prime Minister Justin Trudeau had sided with the Biden Administration in the United States by imposing a 100% tariff on electric vehicles made in China to discourage deloyal competition that could hurt the North American automotive industry.
In addition, Ottawa had also imposed a 25% tariff on Chinese steel and aluminum.
In response, China had reciprocated with a 100% tariff on Canadian Canola oil, peas, and other products, as well as a 25% tariff on seafood and pork products.
A further 76% tariff on canola seed was added later in the year.
Since Canada is the world’s top canola exporter and that China is the country’s biggest market after the United States, this trade war with China and the more recent one with the United States have had a large impact on the Prairie provinces, where most Canola is produced.
Xiaomi electric vehicle lineup | Photo: XiaomiThe Manitoba and Saskatchewan Premiers had voiced concerns that Ottawa was sacrificing their province’s economies in favour of protecting Ontario’s auto sector.
For his part, Ontario Premier Doug Ford claimed that a tariff on Chinese EVs needs to remain unless those vehicles are assembled in Ontario by local workers.
While this seems unlikely, given that the Canadian market is quite small and there would be no possibility of export to the United States, Prime Minister Carney said that as part of today’s deal, Chinese automakers opening a factory in Canada could be in the cards.
The main concern from North American and European automakers is that Chinese electric vehicles are being heavily subsidized by Beijing, which allows them to be sold at an artificially low price.
In turn, this makes them very popular among buyers who want a more affordable EV than what other automakers can offer, leading to reduced sales and profitability for them.
On a longer term, the worry is that competition from Chinese vehicles will force some local automakers out of business, at which point China will be able to raise its own prices.
BYD Atto | Photo: BYDThere are also cybersecurity concerns, as like almost all other new vehicles, Chinese EVs are constantly sending and receiving data over-the-air to and from their manufacturer.
To alleviate some of these worries, today’s deal doesn’t completely remove Canadian tariffs on Chinese electric vehicles, but rather allows up to 49,000 of them to be sold here each year at a 6.1% tariff.
This represents less than 3% of the canadian auto market in 2025, when about 1.9 million new vehicles were sold nationally.
For its part, China will reduce its tariffs on canola seed to 15% by March; other canola products and seafood will also no longer be subject to “anti-discrimination” tariffs, but there was no mention of Canola oil. Similarly, the Canadian tariff on Chinese steel and aluminum was not mentioned either.
It is important to mention too that vehicles manufactured in China by American and European automakers are included in that yearly allowance, meaning that models such as the Polestar 2 and Tesla Model 3 could make up much of the yearly imports.
The current Liberal government aims to double the country’s non-U.S. exports and increase exports to China 50% by 2030, in a bid to reduce Canada’s dependency on the United States.
Source: Automotive News Canada
