Canada cuts EV tariffs in landmark deal with China, breaking from U.S.

Prime Minister Mark Carney walked out of two days of meetings with Chinese leaders on Friday with something his predecessor could not secure: a trade agreement that breaks Canada's alignment with American tariff policy. Canada will cut its 100% tariff on Chinese electric vehicles. In return, China agreed to slash its tariff on Canadian canola seeds from 84% to roughly 15%—a dramatic reversal of the trade war that had effectively locked Canadian farmers out of the Chinese market.

The deal carries specific numbers that frame its scope. Canada will allow 49,000 Chinese-made electric vehicles into the country annually at first, a figure that will grow to about 70,000 over five years. Carney framed this as manageable: roughly 3% of the 1.8 million vehicles sold in Canada each year. He also secured a commitment from China to begin investing in Canada's auto industry within three years, positioning the agreement not as a surrender but as a foundation for building something new. "We're building a new part of our car industry, building cars of the future in partnership," Carney told reporters, emphasizing affordability and a managed transition for workers.

The context matters. Canada had followed the United States in imposing a 100% tariff on Chinese EVs and 25% duties on steel and aluminum under Justin Trudeau. China responded with its own escalation: 100% tariffs on Canadian canola oil and meal, 25% on pork and seafood, and last August, a 75.8% tariff on canola seeds. The cumulative effect was devastating. Canadian imports to China fell 10.4% last year, dropping to $41.7 billion. For an agricultural nation, the closure of the Chinese market to canola—one of Canada's signature exports—was not a minor inconvenience.

Carney's visit was the first by a Canadian prime minister to China in eight years. In meetings with Xi Jinping at the Great Hall of the People, both leaders signaled a willingness to rebuild a relationship that had deteriorated over years of tension. Xi indicated openness to continuing talks that had begun in October at a regional economic conference in South Korea. Carney, for his part, framed the improved relationship as necessary for stabilizing a global governance system he described as "under great strain." He suggested that the post-World War II architecture of international trade agreements may be fragmenting into a patchwork of bilateral and regional deals. "The question is: What gets built in that place? How much of a patchwork is it?" he asked.

The broader political reality is that Carney has been unable to negotiate with U.S. President Donald Trump to reduce tariffs that are harming key Canadian sectors. Trump has made public comments about Canada becoming America's 51st state. China, watching this dynamic, sees an opening. The country is hoping that American pressure on allies will push them toward policies less aligned with Washington. Carney acknowledged the different systems and values between Canada and China—disagreements on human rights, for instance—but argued that cooperation on trade and investment serves both nations' interests without requiring alignment on everything.

The deal has already drawn sharp criticism from Ontario Premier Doug Ford, whose province houses Canada's auto sector and is the country's most populous. Ford posted on social media that China now has a foothold in the Canadian market and will exploit it at the expense of Canadian workers. He warned that lowering tariffs on Chinese EVs risks closing the door to the American market, Canada's largest export destination for vehicles. This tension—between securing relief from Chinese tariffs on agricultural products and protecting the auto sector from Chinese competition—sits at the heart of the political risk Carney has taken.

Carney leaves China on Saturday and will visit Qatar on Sunday before attending the World Economic Forum in Switzerland next week. In Qatar, he plans to meet with business leaders and investors to promote Canadian trade and investment opportunities. The coming weeks will reveal whether the agreement holds, whether Chinese investment in Canada's auto industry materializes on schedule, and whether the political cost at home—particularly in Ontario—becomes a liability for the government.