Canada has enacted a major tariff reduction on Chinese EV imports, opening the door to a new era of competition in the North American auto market (and drawing sharp criticism).
The details: The new agreement, struck by Prime Minister Mark Carney and Chinese leader Xi Jinping, which comes amid tense trade relations between Canada and President Donald Trump’s administration, slashes tariffs on electric vehicles shipped from China to Canada by about 94%.
The reduction cuts the tariff rate on Chinese EV imports to Canada from 100% to 6.1%.
The deal applies to EVs priced at $33,000 or less and is capped at 49,000 vehicles in year one, expanding to 70,000 by year five.
Worth noting: The first-year cap of 49,000 vehicles represents less than 3% of Canada’s total car market and roughly matches the number of Chinese EVs imported into the country in 2023–2024.
Who’s at play: It’s unclear which Chinese EV maker will be first to take advantage of Canada’s new trade agreement, but BYD appears the most obvious candidate, with models like the BYD Seagull or Dolphin.
Why it matters: Canada’s move to allow up to 49,000 Chinese EVs initially (rising toward 70,000 over five years) at a low 6.1% tariff creates a nearby pool of cheaper EV supply that can quickly pressure prices on comparable entry-level models, especially in border markets where shoppers may cross-shop Canadian prices, incentives, and availability.
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Between the lines: Criticism of the Canada–China EV deal has been swift from Canadian and U.S. officials and industry leaders, amid concerns about the threat Chinese vehicles pose to the North American auto industry.
Doug Ford, the Premier of Ontario (home to Canada’s largest automotive manufacturing base) said the agreement raises security concerns and undermines trade relations with the U.S.
Mike Murphy of the American EV Jobs Alliance said Canada’s pivot puts American automakers and auto workers in the middle of a monumental transition.
The Zero Emission Transportation Association, a U.S.-based EV advocacy group, warns the deal has wider implications globally.
Unifor National President Lana Payne called the deal “a self-inflicted wound” to a Canadian auto industry already struggling.
What they’re saying: “Providing a foothold to cheap Chinese EVs, backed by massive state subsidies, overproduction and designed to expand market share through exports, puts Canadian auto jobs at risk while rewarding labour violations and unfair trade practices,” said Payne in a press statement.
Bottom line: Canada’s China-EV deal could strain U.S.–Canada trade ties ahead of the USMCA review and prompt tighter U.S. enforcement to prevent any backdoor entry, leaving dealers exposed to sustained price pressure from a nearby low-cost reference market, plus policy-driven volatility that squeezes margins, incentives, and used-EV values.
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