Key Takeaways
- Canada aims to form joint ventures and investments with Chinese companies to build a Canadian electric vehicle within the next three years.
- The country plans to become the first in North America to build this type of EV, with the goal of growing its 125,000-worker auto industry.
- Canada has reached a deal with China to allow up to 49,000 Chinese EVs into the Canadian market each year at a 6.1 per cent tariff, down from a 100 per cent tariff imposed in 2024.
- The deal has received mixed reactions from the US, with President Donald Trump stating that it’s a good thing for Canada, while other officials have expressed concerns about the impact on American autoworkers.
Introduction to Canada’s Electric Vehicle Ambitions
Canada is looking to establish joint ventures and investments with Chinese companies to build a Canadian electric vehicle within the next three years. According to a senior Canadian official, the goal is for Canada to become the first country in North America to build this type of EV. The official, who spoke on the condition of anonymity, stated that it’s a fundamental error to think that US President Donald Trump will not allow Chinese electric vehicles into the United States. This move is part of Canada’s efforts to grow its 125,000-worker auto industry and eventually "leapfrog" over the US.
Canada’s Deal with China
Canada has reached a deal with China to allow up to 49,000 Chinese EVs into the Canadian market each year at a 6.1 per cent tariff, down from a 100 per cent tariff imposed in 2024. In exchange, China will lower duties on Canadian canola, lobsters, crabs, and peas. The deal was made after Prime Minister Mark Carney met with Chinese President Xi Jinping, and Canada’s ambassador to the US, Kirsten Hillman, kept the Trump administration informed of the conversations with Beijing. The American reaction was reportedly neutral, with President Trump stating that Carney was doing the right thing by signing a trade deal with China.
US Reaction to the Deal
However, not all US officials are pleased with the deal. US Trade Representative Jamieson Greer has expressed concerns, stating that the deal is "problematic for Canada" and that there’s a reason why Chinese cars are not widely sold in the US – to protect American autoworkers and consumers. US Transportation Secretary Sean Duffy also weighed in, saying that Canada would regret bringing Chinese cars into the market. Despite these concerns, President Trump has insisted that the US does not need cars made in Canada and has hit the country’s auto sector with tariffs on Canadian-made passenger vehicles.
Canada’s Auto Policy
The federal government is working on an auto policy, expected to be released in February, which aims to help grow Canada’s auto industry. The policy will give preferential access to foreign automakers that manufacture vehicles in Canada, compared to those who import cars assembled abroad. Foreign automakers that won’t manufacture vehicles in Canada will be subject to less beneficial terms. This move is seen as an effort to encourage foreign investment and job creation in the Canadian auto sector. According to the official, the government is working to "leapfrog" over the US and become a leader in the electric vehicle market.
Impact on the Canadian Auto Sector
The deal with China is expected to make some EVs more affordable for Canadians, with Prime Minister Carney stating that it would amount to just a tiny sliver of the Canadian domestic market – about three per cent. However, Ontario Premier Doug Ford has expressed concerns, saying that the deal was not thought out properly and would be "terrible" for the auto sector. The government’s move to serve automotive giant Stellantis with a notice of default under funding contracts related to projects in Windsor and Brampton, Ont., has also raised concerns about the future of the Canadian auto industry. Despite these challenges, the government remains committed to growing the industry and creating jobs in the sector.
