Key Takeaways:
- Canada has dropped its 100% tariff on Chinese electric vehicles (EVs) as part of a new trade deal with China.
- The move is expected to allow 49,000 Chinese EVs to enter Canada at a tariff rate of 6.1% starting March 1.
- The deal has been met with mixed feelings, with some in the auto industry calling for more clarity and expressing concerns about the impact on Canadian jobs.
- The Canadian government expects Chinese investment and partnership with auto manufacturers and dealers to expand in Canada, leading to the growth of the quota for Chinese EVs.
- The deal is part of a new five-pillar strategic partnership between Canada and China, which includes the removal of punishing Chinese agricultural tariffs.
Introduction to the Trade Deal
The Canadian government’s decision to drop its 100% tariff on Chinese electric vehicles has sparked a significant amount of debate and discussion. The move is part of a new trade deal with China, which was announced by Prime Minister Mark Carney during a visit to Beijing. The deal is expected to allow 49,000 Chinese EVs to enter Canada at a tariff rate of 6.1% starting March 1. This decision has been met with mixed feelings, with some in the auto industry calling for more clarity and expressing concerns about the impact on Canadian jobs.
Background on the Tariff
In 2024, the Canadian government, under the leadership of then-Prime Minister Justin Trudeau, imposed a 100% tariff on Chinese electric vehicles. This move was made in response to concerns that cheaper Chinese-made EVs would hurt the North American auto market. The United States had also imposed a similar tariff on Chinese EVs. However, with the new trade deal, Canada has decided to reduce the tariff, allowing Chinese EVs to enter the country at a significantly lower rate.
Reaction from the US Administration
The US administration has had a mixed reaction to the Canada-China trade deal. While US President Donald Trump has expressed optimism about the deal, calling it a "good thing," other officials have expressed concerns. US Transportation Secretary Sean Duffy has stated that he thinks Canada will "look back at this decision and surely regret it – to bring Chinese cars into their market." The US Trade Representative, Jamieson Greer, was informed about Canada’s decision to introduce a quota on Chinese EVs, and it is expected that the US will eventually open the door to Chinese EVs, with guardrails in place to require the vehicles to be made in the United States.
Impact on the Auto Industry
The deal is expected to have a significant impact on the auto industry in Canada. The Canadian government expects Chinese investment and partnership with auto manufacturers and dealers to expand in Canada, leading to the growth of the quota for Chinese EVs. The government’s new auto strategy, which will be released in February, will prioritize made-in-Canada gas and electric vehicles, giving companies that build in Canada favourable market access. However, some in the industry have expressed concerns about the impact on Canadian jobs, with Unifor national president Lana Payne stating that the deal has made it "a little harder" for the union to protect good auto union jobs in Canada.
Details of the Deal
The deal between Canada and China is part of a new five-pillar strategic partnership between the two countries. As part of the deal, many punishing Chinese agricultural tariffs were removed in exchange for Canada re-opening the door to Chinese electric vehicles. The quota for Chinese EVs will start at 49,000 vehicles, but is expected to grow as Chinese investment and partnership with auto manufacturers and dealers expand in Canada. The vehicles imported into Canada in 2026 will likely be EVs made in China by North American or Asian companies, rather than Chinese companies like BYD, which are not yet certified by Transport Canada.
Conclusion and Future Prospects
The Canada-China trade deal has sparked a significant amount of debate and discussion, with both positive and negative reactions from various stakeholders. While the deal is expected to have a significant impact on the auto industry in Canada, it is also expected to lead to the growth of the quota for Chinese EVs and increase Chinese investment and partnership with auto manufacturers and dealers in Canada. As the deal moves forward, it will be important to monitor its impact on the auto industry and the broader economy, and to ensure that the benefits of the deal are shared by all stakeholders.
