Canada Signals Intent to Reduce Chinese EV Tariffs in New Deal

The Canadian government has informed the United States of its intention to negotiate a deal with China to lower tariffs on certain electric vehicles (EVs). A senior official, speaking on background, confirmed that Canada’s Ambassador to Washington, Kristen Hillman, was aware of the discussions, emphasizing that the U.S. was not caught off guard by this development. The timing of the notification remains unclear, but it is reported that U.S. Trade Representative Jamieson Greer has been briefed on Canada’s plan to implement a quota system for these vehicles.

U.S. President Donald Trump expressed support for the Canada-China agreement, describing it as a “good thing.” He added, “If you can get a deal with China, you should do that.” However, not all officials in the U.S. administration share this optimism. Sean Duffy, the U.S. Transportation Secretary, criticized the decision, stating, “I think they’ll look back at this decision and surely regret it – to bring Chinese cars into their market.”

Background on Tariffs and New Trade Agreement

In 2024, former Prime Minister Justin Trudeau imposed a 100 percent tariff on Chinese EVs, a move mirrored by the U.S. administration. Both countries expressed concerns that lower-cost Chinese electric vehicles could disrupt the North American automotive market. Recently, in Beijing, current Prime Minister Mark Carney signed what he termed a landmark trade arrangement with China, aimed at establishing a new strategic partnership with five key pillars. This accord includes the reduction of tariffs on Chinese agricultural products in exchange for the easing of restrictions on Chinese electric vehicles entering Canada.

The Canadian government plans to unveil its new automotive strategy in February. This policy will prioritize the production of gas and electric vehicles within Canada, offering favorable market access to companies that manufacture domestically. It also aims to attract more investments from foreign automakers interested in establishing manufacturing operations in Canada.

Starting on March 1, Canada will allow the import of up to 49,000 Chinese electric vehicles at a reduced tariff rate of 6.1 percent. However, officials have indicated that these vehicles are unlikely to include models from Chinese manufacturers such as BYD, as they have not yet received certification from Transport Canada. Instead, the imports in 2026 are expected to consist of EVs produced in China by North American or other Asian companies.

Industry Reactions and Future Outlook

The announcement has elicited mixed responses from the automotive industry. Many stakeholders are calling for clarity about the potential ramifications of this deal, which some experts warn could harm the domestic auto sector. Lana Payne, president of the Unifor union, expressed her disappointment, stating, “We have been, for a year now, in the fight of our lives as a union to try and protect good auto union jobs in this country, and the auto sector, too. And this deal has just made that fight a little harder for us.”

Looking ahead, Canada anticipates an increase in the quota for Chinese electric vehicles as investment and partnerships between Chinese auto manufacturers and Canadian companies grow. The expectation is that these collaborations will lead to the construction of electric vehicles in Canada, employing local workers for both domestic sales and export.

During her recent trip to Beijing, Industry Minister Melanie Joly engaged with leaders from companies such as BYD and Magna, a Canadian firm that manufactures auto parts in China. The Canadian government aims to leverage these discussions to enhance the local automotive landscape and ensure that Canadian workers benefit from the evolving industry dynamics.