Over the weekend, Canada and China struck a trade deal which could see Chinese electric vehicles (EVs) heading into the country.
Under the deal, Canada will reduce the 100 per cent tariff on made-in-China EVs to 6.1 per cent for the first 49,000 units per year, a number which will rise to 70,000 cars annually by the fifth year of the deal.
In return, China will slash the tariff it imposes on Canadian canola seed from 85 to 15 per cent in March.
Although Chinese EVs now face fewer financial barriers in the Canadian market, it might take a while for them to start heading to the Great White North, as no manufacturers have yet announced plans to enter the market. Nor do we know which vehicles would comply with Canadian car design rules, which are closely aligned with those in the US.
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Even if Chinese automakers max out their low tariff allocation, Chinese EVs will make up a small portion (under 3.7 per cent) of the Canadian new car market which, according to Statistics Canada, totalled 1.9 million vehicles in 2024.
The Canada-China trade deal is part of a push by Canadian prime minister Mark Carney to diversify the country’s trading base away from the US.
Doug Ford, premier of Ontario, the province where all of Canada’s car plants are located, criticised the trade deal stating, “The federal government is inviting a flood of cheap made-in-China electric vehicles without any real guarantee of equal or immediate investments in Canada’s economy, auto sector or supply chain.”
Since World War II, Canada’s economy has been closely intertwined with its southern neighbour. Their close trading and regulatory environment led to the signing in 1994 of NAFTA, a free trade bloc encompassing Canada, the US, and Mexico.
Relations between Canada and the US turned from cozy to sour when, at the beginning of his second term in 2025, President Donald Trump started referring to Canada as America’s “51st state”, and began slapping tariffs on a plethora of Canadian products, including cars and automotive parts, in what he claimed was a bid to stop the flow of illegal drugs into the country.
This has seen the two countries impose retaliatory tariffs, as well as a sharp fall in holiday traffic heading south, and Canadian liquor boards refusing to stock American rum at their stores.
According to TD Bank, prior to the brinkmanship of the last year, Canada was the USA’s second largest trading partner after Mexico.
The deal announced over the weekend marks a major thaw in relations between Ottawa and Beijing, which have been frosty since 2017 when Meng Wanzhou, chief financial officer of Chinese communications giant Huawei, was arrested in Vancouver at the request of American officials for violating sanctions against Iran. In response, China arrested two Canadians.
In 2024, towards the end of the Biden presidency, Canada followed the US in imposing a 100 per cent tariff on EVs made in China. During the 2025 Canadian election, Mr Carney nominated China as the country’s biggest security threat.
While made-in-China cars have zero presence in Canada and the USA, they’ve made inroads in Mexico. At the start of 2026, Mexico, which has a large car production sector that’s been rocked by the on-going trade wars, raised tariffs to a maximum of 50 per cent on all cars imported from countries without a free-trade agreement, with China-made EVs seeing their tariffs rise from 15 to 50 per cent.