Key Takeaways
- Canada has struck a deal with China to ease tariffs on Chinese electric vehicles in exchange for China lowering retaliatory tariffs on key Canadian agricultural products.
- The deal represents a significant shift in Canada’s policy on China, driven by ongoing uncertainty with the US, its largest trade partner.
- The move is seen as a pragmatic approach by Prime Minister Mark Carney, who says Canada needs to "take the world as it is, not as we wish it to be".
- The deal has been met with mixed reactions, with some hailing it as a positive step for Canadian farmers and others criticizing it for potentially hurting the Canadian auto sector.
- The US has also responded with mixed messages, with President Donald Trump calling the deal "a good thing" while his trade representative expressed concerns.
Introduction to the Deal
The recent deal between Canada and China has sent shockwaves in the trade community, with many experts hailing it as a significant shift in Canada’s policy on China. The deal, which eases tariffs on Chinese electric vehicles in exchange for China lowering retaliatory tariffs on key Canadian agricultural products, has been met with mixed reactions. Prime Minister Mark Carney’s approach to the deal has been characterized as pragmatic, with him stating that Canada needs to "take the world as it is, not as we wish it to be". This approach is seen as a departure from Canada’s previous stance on China, which had been more cautious due to concerns over human rights and security threats.
Reaction to the Deal
The reaction to the deal has been swift and varied. Saskatchewan Premier Scott Moe hailed it as "very good news" for farmers in his province, who have been hard hit by China’s retaliatory tariffs on Canadian canola oil. On the other hand, Ontario Premier Doug Ford was sharply critical of the deal, stating that removing EV tariffs on China "would hurt our economy and lead to job losses". Experts have also weighed in, with some saying that the deal could help China make inroads into the Canadian automobile market, potentially putting pressure on US-based EV makers like Tesla. The expected increase in Chinese EV sales could lead to cheaper prices for Canadian consumers, but it could also hurt Canadian car manufacturers if it comes without further action from the Carney government to help the domestic sector.
Implications for Canada-US Trade Relations
The deal has significant implications for Canada-US trade relations, which have been uncertain in recent years. The US has imposed tariffs on Canadian sectors like metals and automotives, leading to economic uncertainty. The decision to carve out a major new deal with China is a recognition by Carney that the future of North American free trade remains unclear. Experts say that there is a reasonable chance that Canada could end up without a meaningful trade deal with the US in 2026, and that Canada needs to be prepared. The deal with China is seen as a way for Canada to diversify its trade relationships and reduce its dependence on the US.
Details of the Deal
The deal drops Canada’s levies on Chinese EVs from 100% to 6.1% for the first 49,000 vehicles imported each year, with the quota potentially rising to 70,000 in half a decade. In exchange, China will cut tariffs on Canadian canola seed to around 15% by March 1, down from the current rate of 84%. China has also committed to removing tariffs on Canadian canola meal, lobsters, crabs, and peas until at least the end of the year. Additionally, China has committed to removing visa requirements for Canadian visitors. The introduction of Chinese EVs to Canada’s market is likely to mean cheaper prices for Canadian consumers, but it could also hurt Canadian car manufacturers if it comes without further action from the Carney government to help the domestic sector.
US Reaction
The US reaction to the deal has been mixed, with President Donald Trump calling it "a good thing" while his trade representative expressed concerns. Trump has signalled openness to China building plants in the US if it means creating more jobs for Americans, despite his tough-on-China stance. The US president is notably headed to Beijing for his own meeting with President Xi Jinping in April, and has invited Xi for a state visit to Washington. The mixed messages from the US highlight the complexity of the trade relationships between the three countries, and the challenges that Canada faces in navigating these relationships.
Conclusion
In conclusion, the deal between Canada and China represents a significant shift in Canada’s policy on China, driven by ongoing uncertainty with the US. The deal has been met with mixed reactions, with some hailing it as a positive step for Canadian farmers and others criticizing it for potentially hurting the Canadian auto sector. As Canada navigates its trade relationships with the US and China, it is clear that the country needs to be pragmatic and adaptable in order to succeed in an increasingly complex and uncertain trade environment. The deal with China is just the first step in a "recalibration" of Canada’s trade relations, and it will be important to watch how the situation develops in the coming months and years.
