Winners And Losers Emerge As Canada Eases Tariffs on Chinese Electric Vehicles
Canada has agreed to sharply roll back its 100 per cent tariffs on Chinese electric vehicles, a trade-off that marks a broader reset in its relations with Beijing and a notable departure from Washington. But its impact will be felt far beyond Canada’s borders. Following two days of high-level meetings in China, Prime Minister Mark Carney said Ottawa would allow a limited but growing number of Chinese-made electric vehicles into the Canadian market in exchange for significant tariff reductions on Canadian agricultural exports after years of tense relations. “We are building a new strategic partnership that builds on the best of our past, reflects the world as it is today, and benefits the people of both our nations,” Carney said.
screenshot ·screenshot
The move comes despite Mexico imposing tariffs of up to 50 percent on Chinese cars and auto parts starting Jan. 1 to protect its domestic industry from subsidized, low-priced Chinese imports.
According to the regulation, Canada will reduce its current tariff of 100% to 6.1% and allow the import of 49,000 electric vehicles from China, which will increase to 70,000 units within five years. Half of the annual quota is reserved for electric vehicles costing under CA$35,000. Mr. Carney said Beijing will also make a “significant investment” in Canada’s automotive sector over the next three years. In exchange, China will reduce its tariffs on canola seed, one of Canada’s most important agricultural exports, from about 84 percent to 15 percent. The agreement reflects a pragmatic calculation on both sides. Canada is regaining access to a key export market for its farmers, while China is gaining a foothold in North America for its fast-growing electric vehicle industry. This also distinguishes Ottawa from Washington, which has aggressively blocked Chinese electric vehicles with high tariffs and other trade barriers.
China now accounts for nearly 70 percent of global electric vehicle production, and its vehicles are among the most affordable and energy-efficient in the world. Allowing Chinese electric vehicles to return to Canada is expected to lower prices for consumers and accelerate adoption, creating new dynamics for major players. Tesla’s, volvo, pole star And LotusWhile presenting challenges for General Motors.
Lotus ·Lotus
British sports car manufacturer Lotus Technology, majority owned by Geely, predicts an even more dramatic impact. The CA$313,500 price of the Wuhan-built Eletre SUV will drop by about 50 percent as a result of Canada’s discounted tariffs, the company said. Lotus expects the change to have an immediate and meaningful impact on demand; Eletre’s wholesale deliveries are predicted to see “exponential growth” with the influx of tariff benefits.
volvo ·volvo
With established brand recognition, regulatory familiarity and dealer networks in Canada, the Geely-controlled Volvo and Polestar brands are well positioned to reintroduce Chinese-made vehicles into the market. Both companies stopped importing Chinese-made models, including Volvo EX30 and Polestar 2, after the implementation of the 2024 taxes. The new agreement restores the profitability of these imports.
Tesla’s ·Tesla’s
Tesla seems particularly well positioned. According to a Reuters report, Tesla imported more than 44,000 electric vehicles from China to Canada in 2023; This was the last year before Canada’s 100 per cent tariffs in 2024 forced the company to divert supplies to its US and Berlin factories. Although the deal is framed as opening the door to Chinese automakers, Tesla already produces a significant number of vehicles in China. In 2023, the company configured its Shanghai Gigafactory to produce a Canada-spec Model Y, leading to a 460 per cent year-on-year increase in imports of Chinese-made cars through Vancouver. With tariffs sharply reduced, Tesla can resume exports from China to Canada and regain its first-mover advantage in a market hungry for more affordable EVs.
And Reuters reports this volkswagen It plans to export cars developed and produced in China in order to compete with the Chinese in foreign markets.
GM China/Baojun/Wuling ·GM China/Baojun/Wuling
In contrast, General Motors is unlikely to benefit from the new framework. The company’s Wuling and Baojun brand EVs in the Chinese market are designed for cost-conscious consumers in China and do not meet North American safety or regulatory standards; It requires an extensive redesign before it can be sold in Canada, making market entry impractical in the short term. Unlike Lotus, Volvo, Polestar or Tesla, GM can’t quickly leverage the deal to expand its presence in Canada’s growing EV market.
Getty Images ·Getty Images
Other legacy automakers with facilities in Ontario include: ford, honda, toyota and Stellantis’ prices may decline due to Chinese government-subsidized Chinese imports. This could also lead to Canadian-made Chinese vehicles accessing the US market, but only time will tell.
James Ochoa ·James Ochoa
The Canada-China trade deal represents a significant trade recalibration that highlights the changing dynamics of global trade in an era of fragmented alliances and unpredictable tariffs. Canada hopes the agreement will encourage Chinese manufacturers to invest in local manufacturing, create jobs and build a stronger Canadian EV supply chain using Canada’s critical minerals.
Xie Huanchi/Xinhua via Getty Images ·Xie Huanchi/Xinhua via Getty Images
But as the deal gives Chinese EV manufacturers a much-needed entry into the Canadian market previously hindered by high tariffs, it will also increase the challenges faced by Western EV manufacturers by introducing lower-priced Chinese models and accelerate Chinese EV adoption in Canada. The net result is that it triggers a self-inflicted wound for the United States as another foreign market in danger of being dominated by China.
