Key Takeaways
- Canada has reached a deal with China to allow nearly 50,000 Chinese-made electric vehicles into Canada at a low tariff rate in return for reductions in Beijing’s levies on canola seed and other products.
- The deal marks a truce in a painful trade war between Ottawa and Beijing and relieves a major irritant in Canada-China relations.
- Canada has broken with the United States in how it treats Chinese electric vehicles, removing a tariff both countries enacted in 2024.
- The deal raises the prospect that Canada may be putting itself offside of the US’s tough-on-China agenda.
- The agreement includes a quota for Chinese EVs, which will rise by more than six per cent annually, and China has committed to removing tariffs on Canadian canola seed, canola meal, lobsters, crabs, and peas.
Introduction to the Deal
Prime Minister Mark Carney has announced a deal with China to allow nearly 50,000 Chinese-made electric vehicles into Canada at a low tariff rate. This deal is in return for big reductions in Beijing’s levies on canola seed and a promised elimination of its tariffs on a host of other products. The announcement means Canada has broken with the United States in how it treats Chinese electric vehicles, removing a tariff both countries enacted in 2024. This brings about a truce in a painful trade war between Ottawa and Beijing that relieves a major irritant in Canada-China relations.
Details of the Deal
The deal raises the prospect that Canada may be putting itself offside of the US’s tough-on-China agenda, which the President expects allies to follow. The Chinese government did not immediately corroborate any details of the deal in its own statement on the Carney-Xi meeting, saying only that "the two sides reached a preliminary joint arrangement on addressing bilateral economic and trade issues." The deal includes a quota for Chinese EVs, which will rise by more than six per cent annually, and China has committed to removing tariffs on Canadian canola seed, canola meal, lobsters, crabs, and peas. Furthermore, the Prime Minister said, Mr. Xi has committed to removing visa requirements for Canadians travelling to China.
Reaction to the Deal
Chris LaCivita, a co-campaign manager for Mr. Trump’s 2024 presidential campaign, reacted swiftly to the Carney announcement, posting on X that "this is asinine… the current Prime Minister of Canada advocating a strategic partnership with communist China." Mr. Carney, speaking to reporters about the deal at a park in Beijing, said relations with China have recently been more predictable than those with the United States. "In terms of the way that our relationship has progressed in recent months with China, it is more predictable, and you see results coming from that visibility," he said.
Canada’s Trade Strategy
Canada imposed the tariff on Chinese electric vehicles in tandem with the U.S. government in 2024 under the Biden administration. The rationale for Canada’s levies on these imports was that China is subsidizing and overproducing EVs, swamping global markets and undermining other countries’ ability to compete. Mr. Carney did not address those concerns. Asked how he will explain to the United States why Canada is giving China freer access to our automobile market, Mr. Carney played down the amount of low-tariff access granted. He said the quota for Chinese EVs reflects imports from the last full year before the tariff was applied and it is "less than 3 per cent of the size of the Canadian auto market."
Investment and Economic Benefits
The Prime Minister defended allowing in more foreign vehicles at a time when the Canadian auto assembly industry is under pressure, saying the Chinese supply will offer lower-priced EVs for Canadian consumers. "China’s strengths in the electric vehicle sector are undeniable. They produce some of the most affordable and energy-efficient vehicles in the world," the Prime Minister said. Part of the Chinese EV quota will be reserved for cars with an import price of $35,000 or less, Mr. Carney said. The proportion of the quota dedicated to this category will rise 50 per cent by 2030, he said, "kickstarting the availability of more affordable electric vehicles in Canada."
Human Rights and Criticism
Mr. Carney defended his engagement with China despite Western criticism of its human rights record. "We take the world as it is – not as we wish it to be," Mr. Carney told journalists. The Prime Minister said Canada and China "respect the differences in each other’s systems," which means co-operation will be more "focused and limited" than with more like-minded countries. He suggested he doesn’t plan to criticize China publicly. "We don’t grab a megaphone and have the conversations that way."
Conclusion and Future Relations
The deal marks a significant shift in Canada’s trade strategy, as the country seeks to diversify its exports and reduce its reliance on the US market. The Carney government has stressed the need to shift trade away from the United States, which has grown more protectionist under Mr. Trump. Mr. Carney has set a 10-year goal for Canada to double non-U.S. trade, which would generate $300-billion more in annual exports. The Prime Minister’s four-day official visit to China, which began on Wednesday, is the first by a Canadian prime minister since 2017. Relations between Western countries and China deteriorated as countries including Canada blocked Chinese companies from investing in an increasing array of sectors from telecommunications to critical minerals to security-related industries.