Canada cuts tariffs on Chinese EV in new trade structure

Canada and China announced a new agreement Friday that will reduce taxes on electric cars and canola products, marking a fresh start in trade relations between the two countries after months of tensions.

Prime Minister Mark Carney made the announcement in Beijing after meeting with Chinese officials, including President Xi Jinping. This was the first time a Canadian leader had traveled to China since 2017.

Electric vehicle tax drops sharply

Under the agreement, Canada will permit up to 49,000 electric vehicles from China to enter the country with a tax rate of 6.1%, Carney explained to journalists in Beijing. He did not say how long this arrangement would last.

“This is a return to levels prior to recent trade frictions, but under an agreement that promises much more for Canadians,” Carney told reporters.

The new rate represents a major shift from the 100% tax that former Prime Minister Justin Trudeau put in place in 2024. Trudeau’s decision matched similar actions taken by the United States. Before the higher tax went into effect, China had shipped 41,678 electric vehicles to Canada in 2023.

Trudeau had defended his decision by arguing that Chinese manufacturers gained unfair advantages through government support, which threatened Canadian companies trying to compete.

Carney sees the situation differently. “For Canada to build its own competitive EV sector, we will need to learn from innovative partners, access their supply chains, and increase local demand,” he said.

The prime minister believes working more closely with China on clean energy technology and production will bring fresh investment opportunities.

Carney predicted the electric vehicle agreement would lead to “considerable” Chinese investment in Canada’s automobile industry, provide quality jobs for Canadians, and help the country reach its goal of eliminating carbon emissions.

China eases reciprocal trade restrictions

China had responded to Trudeau’s electric vehicle taxes by imposing its own penalties on Canadian agricultural and food exports worth more than $2.6 billion last March. These included canola oil and meal. China added another tax on canola seed in August.

The back-and-forth hurt Canadian exporters. China’s purchases of Canadian products dropped 10.4% in 2025.

The new agreement addresses these problems. Carney said China has agreed to reduce taxes on Canadian canola seed to roughly 15% by March 1.

“This change represents a significant drop from current combined tariff levels of 84%,” he stated. Carney noted that China represents a $4-billion market for Canadian canola seed.

Beyond canola seed, China will also remove special taxes on Canadian canola meal, lobsters, crabs, and peas starting March 1. These changes will remain in place at least through the end of this year, Carney added.

According to the prime minister, the agreements will open up nearly $3 billion worth of sales opportunities for Canadian farmers, fishing workers, and food processing companies as they gain better access to the Chinese market.

Canada’s approach to China coincides with difficult ties with the United States. In addition to imposing taxes on certain Canadian goods, President Donald Trump has openly proposed that Canada become the 51st state of the United States.

China also faces pressure from Trump’s tariffs since he returned to office last year. This has made Beijing interested in building stronger connections with Canada, a Group of Seven member that has traditionally been closely aligned with Washington.

When asked by reporters whether China might be a more stable partner than the United States, Carney pointed to recent progress. “In terms of the way our relationship has progressed in recent months with China, it is more predictable, and you see results coming from that,” he said.

The agreements signal both countries want to move past recent disagreements and focus on economic cooperation that benefits their businesses and workers.

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