Canada broke with the United States and slashed its 100% import tax on Chinese electric vehicles, striking a trade deal that also adjusts tariffs on Canadian farm products, including canola, according to the Associated Press. The move follows President Donald Trump’s broad tariff pressure on trading partners and came as Canada heads into negotiations linked to the renewal of a North American trade pact.
The EV decision is tied to changes on both sides of the deal. Canada’s agreement lowers China’s tariff on canola from 84% to 15%, a change that the AP said is expected to benefit canola farmers with access to export markets. The AP said the pact is also aimed at creating scope for Canada to build its own electric-vehicle supply relationships, even as the industry remains politically and economically sensitive.
“It’s a huge declaration of realignment in Canada’s economic relations,” Edward Alden, a senior fellow at the Council on Foreign Relations who studies trade issues, said Friday. Alden added that the economic threat from the United States is now perceived by Canadians as far bigger than the threat from China, characterizing the development as a “big deal.”
While the deal provides potential export benefits, the AP described it as potentially perilous for Prime Minister Mark Carney. The article said Carney could face retaliation from Trump on the eve of negotiations over the renewal of the U.S.-Mexico-Canada Agreement, a pact Canada depends on for access to the U.S. market.
Trade partners, the AP said, are seeking alternatives to the U.S. as Trump slaps tariffs intended to shift production and investment. The European Union, the AP reported, formally signed a trade pact with Mercosur, an alliance that includes Brazil and Argentina, and was also pursuing a trade deal with India. The AP also said China has diversified exports away from the United States, reporting that China’s trade surplus with the rest of the world surged to a record $1.2 trillion in 2025, as reported by China’s government.
In the AP’s account, Trump’s approach has been characterized by broad tariff increases and targeted levies on specific industries. The article said Trump imposed double-digit taxes on imports from almost every country since returning to the White House in January and singled out industries such as steel and autos for levies of their own. It also noted a separate reported arrangement in which Taiwan agreed to invest $250 billion in the United States in return for Trump reducing the tariff on Taiwan’s products to 15% from 20%.
The AP said Canada’s policy shift toward China marks a turnabout after earlier tariff actions. In 2024, it said, Canada followed the United States by imposing 100% tariffs on electric vehicles from China, reflecting concerns that inexpensive Chinese cars would overwhelm domestic North American automakers. In contrast, the new agreement reduces Chinese tariffs on canola and alters EV import terms for Canada.
Economist Mary Lovely, a senior fellow at the Peterson Institute for International Economics, told the AP that the Trump administration is hostile to EV production in North America, and that U.S. opposition threatens to make the North American auto industry obsolete as China advances in battery and electronics quality. Carney, speaking Friday in support of the approach, said China produces “some of the most affordable and efficient energy efficient vehicles in the world,” and that Canada needs to learn from partners, access supply chains, and increase local demand to build a competitive EV sector.
The AP also reported concerns about the political and strategic context of Canada’s rapprochement with Beijing. Alden said relations between Canada and China have been “extremely fraught,” pointing to a 2018 episode in which China detained two Canadians in retaliation for Canada arresting a Huawei executive at the request of the United States; the three were released in a swap in 2021, the AP said. The AP added that Canada launched an investigation into whether China interfered in Canadian elections in 2019 and 2021.
Even as the federal policy changes proceed, the AP said the deal already drew criticism from Ontario’s auto-producing industry. Ontario Premier Doug Ford blasted the agreement on social media, saying “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 also said lowering tariffs on Chinese electric vehicles risks “closing the door on Canadian automakers to the American market, our largest export destination.”
Carney responded to the criticism by describing the deal as limited. The AP said Carney noted China can export 49,000 EVs to Canada at the reduced 6.1% tariff rate, rising to about 70,000 in five years. The AP framed the main remaining risk as the reaction from the U.S. and the potential implications for the broader North American trade pact renewal.
The AP said the U.S.-Mexico-Canada Agreement comes up for renewal this year and reported that Trump is almost sure to seek changes intended to shift manufacturing to the United States, including the possibility of threatening to pull out. It said Canada sends 75% of its goods exports to the United States. William Reinsch, a former U.S. trade official now with the Center for Strategic and International Studies, told the AP that the Canada-China deal would make the talks more complicated and that Trump will likely take retaliatory measures, possibly targeting the Canadian auto industry, and will make it an issue in USMCA talks.
Even with the risks, the AP reported mixed signals from Trump. On Friday, the AP said Trump commended Carney, saying: “If you can get a deal with China, you should do that.” Carney, in turn, noted the China deal is preliminary, and that it could provide flexibility if changes are needed to head off a conflict with the U.S. The AP added that American automakers and farmers also have incentives to support USMCA, given their supply chains and market access.
For now, Lovely said Carney’s deal sends “a big signal that Canada is looking to other partners and has options that would allow it to walk away from the USMCA before it makes humiliating compromises to serve only American interests.”