When Prime Minister Mark Carney shook hands with President Xi Jinping in Beijing’s Great Hall of the People on Friday, he wasn’t just resetting Canada-China relations. He was breaking rank with Washington on one of the most contentious trade issues facing Western automakers. The deal that emerged represents the first crack in the unified North American wall against Chinese electric vehicles, and it carries implications that will ripple through every automaker’s boardroom from Detroit to Stuttgart.

The Fact: Canada will allow up to 49,000 Chinese electric vehicles at a 6.1% tariff rate, down from the 100% tariff imposed in 2024, with volumes growing to 70,000 annually over five years.

The Delta: More than 50% of these vehicles are expected to be priced under $35,000, creating affordable EV options that do not currently exist in the Canadian market.

The Buyer Impact: Canadian consumers gain access to budget-friendly EVs while U.S. buyers remain locked behind 100% tariffs with limited affordable options.

The Deal: 49,000 Chinese EVs at 6.1% Tariff, Canola Relief by March

The Canada-China tariff agreement slashes import duties on Chinese electric vehicles from 100% to 6.1% for up to 49,000 vehicles annually, representing less than 3% of the Canadian domestic market. This quota corresponds to pre-tariff volumes from 2023-2024, when China exported 41,678 EVs to Canada. In exchange, Beijing will reduce combined tariffs on Canadian canola seed from approximately 85% to 15% by March 1, 2026, unlocking nearly $3 billion in export orders for Canadian agricultural producers.

The deal also removes Chinese anti-discrimination tariffs on Canadian canola meal, lobsters, crabs, and peas through at least year-end 2026. Canada’s federal government has set an ambitious target to increase exports to China by 50% by 2030.

Carney described the pact as “preliminary but landmark,” emphasizing that Canada is pursuing “a partnership that reflects the world as it is today, with an engagement that is realistic, respectful and interest-based.”

Trump’s Tariff Pressure Pushed Ottawa Toward Beijing

Canada’s decision to diverge from American trade policy on Chinese EVs stems from a confluence of economic pressures and geopolitical realities that have intensified since President Donald Trump reimposed aggressive tariffs on Canadian goods. With Trump suggesting Canada could become America’s “51st state” and threatening the CUSMA trade agreement, Ottawa is actively diversifying its economic relationships to reduce dependence on its southern neighbor.

When asked whether China was still the biggest threat facing Canada, a position Carney articulated during the spring election, the Prime Minister’s answer shifted notably.

“The security landscape continues to change, and in a world that’s more dangerous and divided, we face many threats,” he replied. “You manage the threats through engagement.”

The agricultural sector provided immediate political cover. China’s retaliatory tariffs had devastated Canadian canola exports, with imports from Canada falling 10.4% in 2025 to $41.7 billion. Saskatchewan Premier Scott Moe, who accompanied Carney to Beijing, represented prairie farmers desperate for relief from Beijing’s 84% tariff on canola seed.

Doug Ford Slams “Lopsided” Deal as Threat to Ontario Auto Jobs

Ontario Premier Doug Ford responded to the agreement with immediate and forceful opposition, calling it a “lopsided deal” that gives Chinese manufacturers a foothold in the Canadian market at the expense of domestic workers. Ontario’s auto sector employs over 90,000 workers and produced more than 1.3 million vehicles in 2024.

“The federal government is inviting a flood of cheap made-in-China electric vehicles without any real guarantee of equal or immediate investments in Canada’s economy, auto sector or supply chain,” Ford stated on X.

Ford warned the deal risks “closing the door on Canadian automakers to the American market” and called for federal support to make Ontario’s auto sector more competitive, including ending the EV sales mandate and eliminating fees that add costs to vehicle manufacturing.

The Automotive Parts Manufacturers Association’s Flavio Volpe urged caution, noting that China’s “industrial interests are frequently hostile to ours.” However, Volpe acknowledged that if Chinese manufacturers invested in Canadian production, employed local workers, and purchased domestic materials, “they become Canadian cars too.”

BYD Leads the Queue for Canadian Market Access

BYD, which overtook Tesla as the world’s largest electric vehicle manufacturer in 2025 with 2.26 million battery-electric deliveries, represents the most likely beneficiary of Canada’s reduced tariffs. The company already operates in more than 100 countries and has demonstrated aggressive pricing strategies that undercut Western competitors by significant margins.

According to Canada’s federal government, more than 50% of the Chinese EVs entering under the agreement are expected to be affordable models priced under $35,000. This addresses a critical gap in the Canadian market, where the Chevrolet Bolt was paused despite being the most popular non-Tesla EV in the country, and no compelling electric option currently exists below $40,000.

Chinese automakers now control approximately 70% of global EV production and operate on 18-month product development cycles, compared to 4-5 years for traditional Western manufacturers. Six of the top 10 global EV sellers are now Chinese brands, with Chinese companies capturing 85% of EV sales in both Brazil and Thailand in 2024.

Canada’s 6.1% Tariff vs. America’s 100% Wall

The United States maintains 100% tariffs on Chinese electric vehicles, a policy implemented under President Joe Biden in 2024 and continued under President Trump. Additional tariffs of at least 145% apply to Chinese battery components, effectively blocking Chinese manufacturers from the American market entirely. Direct Chinese EV exports to the U.S. and Canada collapsed 73% year-to-date in 2025 before this deal.

The European Union imposed 45.3% tariffs on Chinese EVs last October and continues negotiating a potential minimum price agreement with Beijing. Those talks restarted in December 2025 after months of stalled discussions, with the EU considering replacing tariffs with price commitments that would reshape how Chinese EVs enter European markets.

Canada’s 6.1% most-favored-nation tariff rate stands dramatically below both American and European barriers, creating a unique North American entry point for Chinese manufacturers.

EVXL’s Take

This deal exposes a fundamental tension we have documented throughout 2025: the gap between tariff-wall protectionism and market reality continues to widen. Chinese manufacturers demonstrated their competitive advantages have nothing to do with subsidies alone. BYD achieved near-price parity with gasoline vehicles through genuine manufacturing scale, vertical integration, and development cycles that move at smartphone speed.

As we reported in our coverage of Chinese EV exports surging to Mexico, manufacturers blocked from direct U.S. access have successfully pivoted to markets without tariff barriers. Mexico became the world’s largest destination for Chinese cars in early 2025, proving demand exists for affordable EVs when policy allows it. Canada just joined that club.

The uncomfortable truth for Washington: tariff walls cannot save American automakers from themselves. GM wrote off $6 billion on its EV business. Ford took $19.5 billion in charges. Legacy automakers retreated from Chinese competition rather than rising to meet it. Now Canada, America’s closest trading partner and integrated auto manufacturing neighbor, has signaled that fortress protectionism may not be the only path forward.

Expect Doug Ford’s objections to intensify as Chinese EVs begin appearing on Canadian roads later this year. Expect American consumers to notice when their neighbors drive $30,000 EVs they cannot purchase. And expect the 2026 CUSMA renegotiations to become even more contentious as Washington grapples with an ally that chose engagement over isolation.

The 6-month prediction: Canadian dealers will begin taking orders for BYD models by Q3 2026, with initial pricing at least $8,000-$12,000 below comparable domestic offerings. Used EV prices in Canada will face downward pressure as the affordable segment finally receives competition that has been blocked elsewhere.

Editorial Note: This article was researched and drafted with the assistance of AI to ensure technical accuracy and archive retrieval. All insights, industry analysis, and perspectives were provided exclusively by Haye Kesteloo and our other EVXL authors, editors, and Youtube partners to ensure the “Human-First” perspective our readers expect.