Canada and China recently signed a significant agreement that allows China to export electric vehicles (EVs) to Canada with a reduced tariff rate of 6.1 percent. As part of this deal, China agreed to an annual import quota of no more than 49,000 Chinese EVs. It is an incredibly important advance for the automotive future of both countries. The landmark agreement is supposed to increase cooperation and tackle changing tides in the global auto industry.
The agreement requires that by 2030 half of imported Chinese electric vehicles (EVs) be priced below $35,000. This allows for lower-priced varieties to be offered on the market. This stipulation serves the double purpose of making EVs more affordable to Canadian consumers and increasing competition for the EV market. The federal Canadian government views the rollout of these vehicles as an opportunity for economic stimulus. Yet, domestic manufacturers have voiced strong opposition to this step.
The Canadian automotive sector has gone through some trying times. Tariffs enacted by the United States during the Trump era have limited the movement of Canadian-built vehicles over the line. Responding to the announcement, Prime Minister Justin Trudeau made clear that he sees any future Chinese-prod auto production in Canada as being compatible only with Canadian labor standards. With foreign ownership of the industry increasing, he’s laser-focused on maintaining worker rights.
The agreement is not limited to electric vehicles, as it lays out new commitments on agricultural trade. Effective March 1, China intends to reduce its tariff on canola seed dramatically from 84 percent to 15 percent. Tariffs on canola meal, lobster, peas and crabs will all be suspended. This crucial decision will improve trade relations across the American-Canadian border for both countries at least until the end of 2023.
In 2024, Canada joined the U.S. in imposing a 100 percent tariff on Chinese electric vehicles due to allegations of unfair subsidies and market dumping. That earlier decision cast a shadow of mistrust. This new agreement represents a striking pivot from punitive to collaborative in US trade policy.
Former Bank of England Governor Mark Carney was instrumental in brokering this deal. He declared his excitement for its transformative impact on Ontario’s workforce and the broader Canadian economy. He noted that direct conversations with Chinese companies have revealed an “explicit interest and intention to partner with Canadian companies.”
“We’ve had direct conversations directly from the Chinese companies… with explicit interest and intention to partner with Canadian companies.” – Mark Carney
Carney underscored that this exciting new initiative is a huge opportunity for Ontario and the rest of Canada. He underscored what a powerful tool it could be if done in a deliberate, careful fashion.
“We’ll see what comes to pass. This is an opportunity for Ontario. It’s an opportunity for Ontario workers, opportunity for Canada, done in a controlled way with a modest start.” – Mark Carney
Doug Ford, Ontario’s Premier, expressed concern that lowering tariffs on Chinese EVs could jeopardize Canadian automakers’ access to the American market. Canada’s largest export destination. As he put it, such risks would be catastrophic for the economy and labor market.
“Worse, by lowering tariffs on Chinese electric vehicles this lopsided deal risks closing the door on Canadian automakers to the American market, our largest export destination, which would hurt our economy and lead to job losses.” – Doug Ford
Michael Kovrig, the former Canadian diplomat detained by China for almost three years, even warned of the national security risks of opening Canada’s doors to Chinese EVs. He warned that this might speed up China’s already vigorous industrial overproduction plan at the cost of Western democracies.
“The big concern with letting Chinese electric vehicles into Canada is that it would help accelerate a process that China is already driving through massive industrial overproduction of de-industrializing Western democracies.” – Michael Kovrig
Not withstanding these concerns, Carney was adamant that Canada wants to be competitive in the future auto market. He reiterated that this deal serves as a demonstration phase to break into the market. He definitely went further to undersell 49,000 EVs again.
“That’s what he should be doing and it’s a good thing for him to sign a trade deal. If you can get a deal with China, you should do that.” – Donald Trump
