Canada is trying to rebuild its auto industry around two new partners at the same time that the trade framework holding the old one together is approaching a make-or-break review.
On March 1, Ottawa began issuing import permits for Chinese EVs at the standard 6.1% tariff.
The new tariff rate ended a 100% surtax it had imposed just 17 months earlier when Canada matched the tariff imposed by the Biden Administration on imported electric vehicles from the world’s largest EV maker.
On the first day of July, it must convene with the United States and Mexico under Article 34.7 of the United States-Mexico-Canada Agreement to decide whether to extend the deal for another 16 years, negotiate revisions, or allow it to enter annual review until its 2036 expiration.
The Chinese EV Opening
Canada’s new quota covers up to 49,000 Chinese EVs in the 12 months to February 28, 2027.
The first 24,500 permits are available from March 1 on a first-come, first-served basis.
A second tranche of 24,500 opens September 1, absorbing any unused volume from the first phase.
The government has indicated the annual quota could rise to 70,000 vehicles within five years.
Covered imports must comply with Canadian safety and regulatory requirements and carry shipment-specific permits.
Before the surtax took effect, China exported 41,700 new energy passenger vehicles to Canada in 2023 — up 751% year-on-year — and 13,200 units in the first half of 2024, up 500%, according to China Passenger Car Association data.
The surtax effectively halted that flow overnight.
When announcing the deal in Beijing on January 16, Carney set out what Ottawa expects in return.
“It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain,” the Prime Minister’s Office said in a statement.
On vehicle pricing, the government added that “in five years, more than 50% of these vehicles will be affordable EVs with an import price of less than $35,000, creating new lower-cost options for Canadian consumers.”
First Movers
BYD is the furthest ahead among Chinese brands, having already completed compliance work for potential Canadian exports, as reported by EV on Friday.
Chery has started seeking engineering, certification, and driver-assistance roles targeting Canada and the broader North American market last January, shortly after the new tariff agreement was announced.
As EV has reported, nearly all other Chinese automakers remain absent from Canada’s vehicle import registry.
Tesla has moved to fill the quota on its own terms, pulling US-made Model 3s from the Canadian market as it repositions supply.
The opening carries a political cost.
After Carney agreed to the Chinese EV arrangement, Trump threatened 100% retaliatory tariffs on Canadian goods.
The USMCA Stakes
On January 13 — three days before Canada announced the tariff deal with China — US President Donald Trump said the United States-Mexico-Canada trade agreement is not relevant for the country.
“There’s no real advantage to it, it’s irrelevant,” Trump stated. “Canada would love it. Canada wants it. They need it.”
Automotive products account for roughly 22% of total USMCA trade, according to the Baker Institute — the single largest category.
Components in a finished North American vehicle may cross the Canada-US border seven or more times during production.
Higher tariffs would not simply raise costs; they would force a structural reorganisation of supply chains built over six decades.
The average US tariff rate on Canadian products has risen from 0.1% to 5.8% over the past year, the Bank of Canada said in a January report.
Canada’s auto sector shed thousands of jobs in January alone, with General Motors cutting positions at an Ontario plant and Stellantis redirecting investment from its Brampton facility toward US production.
Trump’s chief trade negotiator Jamieson Greer told CBC that Canada should accept “some level of high tariff” on its exports to the US, according to the Washington Post.
“Reshoring didn’t happen fast enough,” Greer said in the same report. US auto factories were running at 58% of capacity as of that reporting — their lowest in more than four years, according to the Federal Reserve data.
Carney’s Two-Track Strategy
The Carney government is not relying solely on USMCA survival.
As EV reported on Sunday, Ottawa has tied a $20 billion submarine procurement contract to demands that South Korea and Germany each commit to opening auto assembly plants in Canada.
Industry Minister Mélanie Joly signed a memorandum of understanding with Seoul on January 29 covering Korean automotive manufacturing investment and separately travelled to Berlin to negotiate a parallel arrangement with Germany.
Canada has also moved to sharpen its auto duty rules to protect local jobs.
Sun Xiaohong, secretary-general of the automotive branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said China-Canada cooperation in the auto sector could eventually extend beyond vehicle exports to local production.
Canada’s Industry Minister Melanie Joly has kept open through separate talks with BYD and Chery about potential joint ventures with Canadian parts suppliers, as EV has reported.
