Canada will remove punitive tariffs on Chinese electric vehicles and allow up to 49,000 units annually under a preferential rate, Prime Minister Mark Carney announced Friday.
The agreement, reached during Carney’s three-day state visit to Beijing, will replace the 100% duty Canada imposed on Chinese EVs in 2024 with a 6.1% tariff on imports below the volume cap.
In exchange, China will lower tariffs on Canadian canola seed to approximately 15% from about 85%.
“President Xi and I are announcing that Canada and China are forging a new strategic partnership,” Carney said after meeting with Chinese President Xi Jinping.
Deal Terms
In a statement, Carney outlined the details of the agreement and its expected impact on Canada’s automotive sector.
“To help deliver the full potential of these partnerships, and build up our domestic manufacturing sector, Canada will allow up to 49,000 Chinese electric vehicles (EV) into the Canadian market, with the most-favoured-nation tariff rate of 6.1%,” Carney said.
“This amount corresponds to volumes in the year prior to recent trade frictions on these imports (2023-2024), representing less than 3% of the Canadian market for new vehicles sold in Canada,” the country’s PM said.
The prime minister said the deal would drive Chinese investment into Canadian manufacturing.
“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,” Carney said.
The agreement also aims to bring more affordable electric vehicles to Canadian consumers.
“With this agreement, it is also anticipated 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,” Carney added.
Break With Washington
The agreement represents a notable departure from US policy as Canada seeks to reduce its economic dependence on its southern neighbor.
Canada initially imposed the 100% EV tariff in 2024 at the behest of the Biden administration, aligning with Washington’s efforts to block Chinese electric vehicles from North American markets.
Prior to his arrival in Beijing on Wednesday, Carney wrote on X that “China is our second-largest trading partner, and the world’s second largest economy.”
“A pragmatic and constructive relationship between our nations will create greater stability, security, and prosperity on both sides of the Pacific,” he added.
Trade Tensions
China imposed agricultural tariffs on Canadian products last year in retaliation for the EV levies.
Hours before Carney’s arrival in Beijing, Chinese customs data showed imports from Canada fell 10.4% in 2025 to $41.7 billion, the first decline since 2020 and down from a record high the previous year.
Chinese EV Expansion
Several Chinese automakers have been expanding into the Americas, primarily through markets in South America.
BYD began manufacturing vehicles in Brazil last year, while XPeng entered Guatemala, Uruguay, and Colombia in 2025.
Nio indicated in November that it would bring its Firefly sub-brand to North America for the first time, with plans to debut in Costa Rica this year.
The company has shelved plans to enter the US market last year — as exclusively reported by EV in June — but the Canadian agreement could open new possibilities in North America.
Carney paused Canada’s Electric Vehicle Availability Standard for 2026 last September as the government reassesses EV adoption targets amid the tariff environment.
Ford x BYD
The Wall Street Journal reported on Thursday that the Detroit automaker Ford is in talks with the Chinese giant BYD over a battery supply deal for hybrid vehicles.
Trump’s trade adviser Peter Navarro reacted on X, saying, “So Ford wants to simultaneously prop up a Chinese competitor’s supply chain and make it more vulnerable to that same supply chain extortion? What could go wrong here?”
In a follow up post, Navarro warned that Tesla would suffer consequences with the arrival of BYD.
“Did Ford forget the rare earth extortion already? BYD is the latest predatory pricing kid on the block. Aim is to control global EV production– Tesla will be a footnote if this keeps up,” Trump’s trade adviser added.
