Canada cuts Chinese EV tariffs, wins canola access in deal that risks US trade pact

The deal, which trade analysts described as a significant reorientation of Canadian trade policy, carries substantial risks: Canada sends 75% of its goods exports to the United States, and the agreement arrives as the U.S.-Mexico-Canada Agreement faces renewal talks that President Donald Trump is expected to use to demand manufacturing concessions from Ottawa.

Canada slashed its 100% import tax on Chinese electric vehicles and secured sharply lower Chinese tariffs on canola seeds in a trade deal struck Friday in Beijing, as Prime Minister Mark Carney moved to diversify Canada’s economic partnerships amid sustained U.S. tariff pressure.

The agreement reduces Canada’s EV tariff to 6.1% for a quota of 49,000 Chinese vehicles annually — rising to about 70,000 in five years — while China cut its tariff on Canadian canola from 84% to 15%.

“It’s a huge declaration of realignment in Canada’s economic relations,” said Edward Alden, senior fellow at the Council on Foreign Relations. “The economic threat from the United States is now perceived by Canadians as far bigger than the economic threat from China. So this is a big deal.”

Risk to the North American trade pact

The deal carries substantial risk for Canada. The country sends 75% of its goods exports to the United States, and the Friday agreement arrives as the U.S.-Mexico-Canada Agreement — the regional pact that allows many goods to cross North American borders duty-free — comes up for renewal in 2026.

Analysts said the Canada-China deal is likely to complicate those talks. Trump is expected to use the renewal to demand concessions meant to shift manufacturing to the United States, and the new Beijing agreement gives him an additional point of leverage.

The Canada-China agreement “will make the talks more complicated. Trump will not be pleased with the Canadian action, will probably take some retaliatory measure, probably against the Canadian auto industry, and will certainly make it an issue in the USMCA talks,” said William Reinsch, a former U.S. trade official now with the Center for Strategic and International Studies.

Trump offered a measured initial response Friday. “If you can get a deal with China, you should do that,” he said.

Carney noted that the deal is preliminary, potentially giving him room to seek modifications if conflict with Washington threatens to escalate.

Canola gains and auto industry concerns

The agreement delivers clear benefits for Canadian canola farmers, who had faced an 84% Chinese tariff. The reduction to 15% was hailed by farm groups as a potential restoration of a major export market.

Ontario Premier Doug Ford, whose province anchors Canadian auto production, opposed the deal sharply.

“Make no mistake: China now has a foothold in the Canadian market and will use it to their full advantage at the expense of Canadian workers,” Ford posted on social media. “Worse, by lowering tariffs on Chinese electric vehicles this lopsided deal risks closing the door on Canadian automakers to the American market, our largest export destination.”

Carney defended the pact’s limited scope and pointed to Canada’s need to engage with Chinese electric vehicle expertise.

“China’s strengths in electric vehicle sector are undeniable,” Carney said. “China produces some of the most affordable and efficient energy efficient vehicles in the world. And in order for Canada to build our own competitive EV sector, we need to learn from innovative partners, access their supply chains, and increase local demand.”

A broader global realignment

Canada is not alone in seeking alternatives to the U.S. market. The European Union formally signed a trade pact with Mercosur, the South American trade bloc, on Saturday, and the EU is also pursuing a separate agreement with India.

China reported Wednesday that its global trade surplus surged to a record $1.2 trillion in 2025, according to the Chinese government, even as its exports to the United States declined.

Mary Lovely, senior fellow at the Peterson Institute for International Economics, said the Trump administration’s posture on clean energy is reshaping the North American auto industry’s long-term prospects. The administration “is actively hostile to EV production in North America,” Lovely said, and its opposition “threatens to make the North American (auto) industry obsolete in the future, as China moves ahead with rapid quality improvements in batteries and electronics for EVs.”

Fraught diplomatic backdrop

The Canada-China deal also carries diplomatic weight beyond its trade provisions. Relations between Ottawa and Beijing have been fraught since 2018, when China detained two Canadians in retaliation for Canada’s arrest of a Huawei Technologies executive at U.S. request. All three were released in a 2021 exchange. Canada subsequently launched an investigation into alleged Chinese interference in its 2019 and 2021 federal elections.

Alden said Carney’s decision to move forward despite that history reflects how severely Trump’s trade posture has reshaped Canadian economic calculations.

“This was an extraordinarily difficult thing for Carney to do,” Alden said. “Relations between Canada and China have been extremely fraught.”