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Updated 17 January 2026 - Canada has struck a trade agreement with China, easing tariffs on electric vehicles in exchange for reduced duties on agricultural exports, marking a strategic pivot in its foreign policy.
Carney defends pragmatic approach to China
Canadian Prime Minister Mark Carney framed the deal as a necessary adaptation to global realities, stating, "We take the world as it is, not as we wish it to be." The agreement, announced Friday, follows nearly a year of tensions after Carney previously labeled China "the biggest security threat" to Canada.
Carney told reporters the arrangement reflects a "recalibration" of Canada's relationship with Beijing-"strategically, pragmatically, and decisively." He emphasized that the world had changed in recent years, positioning Canada to navigate a "new world order." The prime minister added that Canada's ties with China had become more stable than its unpredictable trade relations with the U.S. under former President Donald Trump.
Trade-offs: EVs for agricultural relief
The deal reduces Canada's 100% tariff on Chinese electric vehicles to 6.1% for the first 49,000 imports annually, with potential increases to 70,000 vehicles within five years. In return, China will slash tariffs on Canadian canola seed from 84% to 15% by 1 March and eliminate duties on canola meal, lobsters, crabs, and peas until at least year-end. Beijing also agreed to waive visa requirements for Canadian travelers.
China, which produces 70% of the world's EVs, had faced accusations of overproduction and market distortion. Canada and the U.S. imposed tariffs in 2024 to counter these concerns. The new agreement, however, opens Canada's market to cheaper Chinese EVs, with analysts projecting a 10% share for Chinese automakers in Canadian EV sales.
Mixed reactions across Canada and the U.S.
Domestic responses were divided. Saskatchewan Premier Scott Moe praised the deal as "very good news" for farmers hit by retaliatory tariffs on canola oil. Conversely, Ontario Premier Doug Ford criticized the move, warning it would harm Canada's auto sector and trigger job losses. In a post on X, Ford accused Carney's government of inviting "a flood of cheap made-in-China electric vehicles" without guarantees of reciprocal investment.
U.S. reactions were similarly split. Trade Representative Jamieson Greer called the deal "problematic," while President Trump endorsed it, stating, "If you can get a deal with China, you should do that." Trump's second term has been marked by tariffs on Canadian metals and automotives, alongside threats to scrap the USMCA trade pact with Canada and Mexico.
Experts warn of risks and opportunities
Vivek Astvansh, a business professor at McGill University, suggested the deal could pressure U.S.-based EV manufacturers like Tesla, which are expanding in Canada. He interpreted the move as a signal to Washington that Canada is warming to China amid trade uncertainties.
Gal Raz, an EV supply chain expert at Western University, noted the deal could lower prices for Canadian consumers but cautioned it might disadvantage domestic automakers without further government support. Raz attributed the shift to deteriorating Canada-U.S. trade relations, calling it an "unfortunate" consequence of U.S. policies that have cornered Canada.
Carney defended the agreement, highlighting China's production of "affordable and energy-efficient vehicles." He expressed optimism that the deal would attract Chinese investment in Canada's auto sector, though he did not provide specifics.
Broader implications for North American trade
Eric Miller, a Washington-based trade adviser, told the BBC the deal reflects Canada's need to prepare for a potential collapse of the USMCA. With the pact under mandatory review, Miller warned of a "reasonable chance" that North America could lack a functional trade agreement by 2026.
Trump, who is scheduled to meet Chinese President Xi Jinping in April, has previously expressed openness to Chinese manufacturing plants in the U.S. if they create jobs. His remarks at the Detroit Economic Club this week echoed this stance: "Let China come in, let Japan come in."
"The prime minister is saying, essentially, that Canada has agency too, and that it's not going to just sit and wait for the United States."
Eric Miller, President, Rideau Potomac Strategy Group
