Canada cuts 100% tariff on Chinese electric vehicles

Canada is moving ahead with a major shift in its trade policy on electric vehicles from China. The federal government will cut a 100% tariff on Chinese-made EVs down to 6.1%, opening space for tens of thousands of lower-priced cars to enter the market each year starting this spring.

Prime Minister Mark Carney announced the decision in Beijing after talks with Chinese President Xi Jinping, framing the move as part of a broader reset in relations after years of tension. He argued that the agreement will support Canada’s push on affordability and clean technology, and that cooperation with China is now essential for Canada’s long-term industrial strategy.

Trade deal slashes tariffs and sets EV quota

Under the deal, Canada will cut the special 100% surtax that had been applied to Chinese electric vehicles and return to the most-favored-nation rate of 6.1% for imports that fall within a new annual quota. The quota starts at 49,000 vehicles a year, roughly matching the number of Chinese EVs that entered Canada in 2023 and 2024, and can rise to about 70,000 units over the next five years, officials say.

Those volumes account for a small share of Canada’s total auto market, which sees around 1.8 million new vehicles sold each year. Still, the move is politically sensitive, since it applies at a time when the United States is keeping steep barriers on Chinese EVs in place. In 2023, China exported 41,678 EVs to Canada, and more than 80% came from Tesla’s Shanghai factory; the new rules could diversify that mix in favor of Chinese brands.

Carney told reporters that Canada needs reliable partners in order to build “cars of the future” and that Chinese cooperation on investment and supply chains is now part of that picture. The tariff cut is one piece of a broader “China‑Canada Economic and Trade Cooperation Roadmap” that both sides endorsed during his visit.

Cheaper EVs for consumers and possible new investment

The federal government expects the agreement to lead to more affordable electric vehicles on Canadian roads over the next few years. Officials project that by 2030, more than half of imported Chinese EVs entering under the quota will sell for 35,000 Canadian dollars or less, a price point that could appeal to buyers who have so far stayed away from higher-cost models.

Analysts say this could ease pressure on households after Ottawa phased out national EV purchase rebates and earlier raised barriers on Chinese cars. Clean Energy Canada, a climate policy group, welcomed the move and argued it could help reverse what it sees as a recent slide in EV sales.

Carney and his ministers say the deal is about more than imports. They argue it will attract “considerable” Chinese joint‑venture investment into Canada’s EV supply chain, including batteries and related technologies, provided projects align with national security rules. Industry Minister Mélanie Joly said the government remains open to Chinese capital in renewable energy and battery manufacturing, and noted ongoing talks with CATL, the Chinese battery giant that already has energy storage projects in Ontario.

Agriculture gains on canola, seafood and peas

In return for the EV concessions, China agreed to ease pressure on key Canadian exports that had faced high barriers. By March 1, 2026, tariffs on Canadian canola seed going into China will drop from about 84% to 15%, reopening a market that farmers say had been choked by previous measures.

China will also remove 100% tariffs on canola meal, lobster, crab and peas at least through the end of 2026. Ottawa estimates those steps could support almost 3 billion Canadian dollars in new export orders for agricultural producers and related businesses. China is already Canada’s second‑largest single-country trading partner, with goods trade worth nearly 119 billion Canadian dollars in 2024, and officials say this package is meant to deepen that link even more.

Critics in Canada warn that the EV deal could hit domestic manufacturing hard, particularly in Ontario, which is home to the country’s main auto plants. The province’s premier, Doug Ford, sharply attacked the agreement soon after it was unveiled.

He argued that Ottawa is “inviting a flood of inexpensive, made‑in‑China electric vehicles without any real assurance of equivalent or immediate investments in Canada’s economy, automotive sector, or supply chain.” Ford said he worries the move will hurt access to the U.S. market, which buys most of the vehicles built in Ontario, and could put jobs at risk in plants in Brampton, Oshawa and Ingersoll if the United States hardens its stance in response.

Ford also complained that neither the province nor the auto makers were consulted in any meaningful way before the federal government moved ahead, calling the deal poorly thought out and rushed. Union leaders in the auto belt echoed parts of that message. Jeff Gray, who leads Unifor Local 222 at GM’s Oshawa operations, said allowing what he described as heavily subsidized Chinese EVs into Canada “does not instill confidence” among workers who are trying to plan for the future.

Some industry experts take a different view. Peter Frise, an automotive engineering professor at the University of Windsor, pointed out that 49,000 EVs equal about 30 to 35 days of output at one large assembly plant and said most of the cheaper models would compete in segments where Canadian factories are not currently dominant.

U.S. sends mixed message on Canada’s move

Reactions from Washington have been uneven. President Donald Trump offered unusual backing for Carney’s approach, telling reporters that “If you can get a deal with China, you should do that” and calling the agreement “a good thing.” He added that he wants Chinese auto makers that sell into North America to set up plants in the United States, as long as they create jobs there.

Some senior U.S. officials and lawmakers, however, raised alarms. U.S. Trade Representative Jamieson Greer said Canada “may regret it in the long run” and argued that tariffs are central to protecting American autoworkers from waves of low‑cost Chinese vehicles. At a Ford facility in Ohio, Transportation Secretary Sean Duffy told workers that Chinese EVs landing in Canada are “not coming to our shores” and stressed that U.S. rules will keep them out of the American market.

Greer pointed to strict cybersecurity rules that now apply to internet‑connected vehicles entering the United States and said those regulations make it very hard for Chinese manufacturers to gain access. In Congress, Senator Brian Schatz criticized the China‑Canada deal and claimed the United States had been “absolutely rolled,” a line that fed into a wider debate in Washington over trade strategy.

Chinese brands eye Canadian market

For Chinese car makers, the new Canadian terms look like a significant opening. BYD, which surpassed Tesla as the largest global seller of electric vehicles in 2025, is well placed to move quickly. The company already runs a bus assembly facility in Newmarket, Ontario, and has been talking with Canadian officials about broader passenger vehicle access.

BYD has a wide range of products, from the low‑priced Seagull city EV at around 10,000 U.S. dollars to higher‑end models such as the Seal and luxury Yangwang line. That range could let it target different groups of Canadian buyers as the quota takes effect.

Provinces with strong EV policies and existing charging infrastructure, such as Quebec and British Columbia, are viewed as likely first landing spots for these vehicles. Markets where price sensitivity is high, and where public incentives support lower‑emission cars, may see new competition for established brands, including Tesla, which is itself expanding its footprint in Canada.

The EV deal fits into a wider shift in Canada’s foreign and economic policy. Carney has been blunt in saying that relations with Washington have reached a “rupture” after tariffs on Canadian lumber, steel and cars, as well as political threats about treating Canada like a “51st state.” In Beijing, he used that backdrop to argue that Canada needs more than one major partner and that China can help deliver growth and supply security if managed carefully.

The new strategic partnership covers far more than vehicles. It extends to energy, including oil, gas, uranium and renewables; to tourism, with steps toward easier travel for Canadians visiting China; and to cooperation on customs and law enforcement. Carney has set a target of increasing exports to China by 50% by 2030.

China’s leadership has welcomed the opening. State media reports describe Xi as calling for steady, “solid” development in the relationship and portraying the agreement as a sign that both countries want to reset after a series of disputes.

The new tariff and quota regime is set to take effect on March 1, 2026, barring any late change or delay.