Breaking with Washington, Canada makes a major trade concession to China that reshapes the auto market

Canada has agreed to sharply reduce its 100 percent tariff on Chinese electric vehicles, a move that could significantly alter the North American auto market. The decision represents a notable shift in Canada’s trade posture and signals a cooling in its alignment with the United States.

The development was reported by CBS News, which detailed how the concession was made in exchange for China lowering tariffs on key Canadian agricultural exports. The agreement follows high-level talks aimed at resetting economic ties between the two countries.

Prime Minister Mark Carney announced the change, following two days of meetings with Chinese officials in Beijing. He said the talks produced concrete outcomes at a time when Canada has struggled to secure tariff relief from Washington.

A clear shift away from U.S.-led trade alignment

Carney said Canada’s recent engagement with China has delivered more predictable results than its current relationship with the United States. He contrasted the progress in Beijing with stalled efforts to negotiate reduced U.S. tariffs that continue to affect major Canadian industries. Diplomatic tensions involving U.S. allies have underscored the strain surrounding Washington’s recent foreign policy approach.

The prime minister also pointed to strained relations with Washington, noting that U.S. President Donald Trump has previously joked about Canada becoming the 51st state. Carney said his government is focused on reducing dependence on the U.S. during what he described as a period of global trade disruption.

The tariff cut opens the door for more affordable electric vehicles in Canada. Carney said that within five years, more than half of imported Chinese EVs are expected to arrive with an import price below 35,000 Canadian dollars, a level that would significantly expand consumer access.

To address concerns from domestic automakers and labor groups, the agreement includes limits on volume. Chinese EV exports to Canada will initially be capped at 49,000 vehicles per year, with that figure gradually rising to around 70,000 over five years. Carney said the initial cap represents roughly three percent of Canada’s annual vehicle sales, allowing for a gradual adjustment.

China has also committed to begin investing in Canada’s auto sector within three years. Carney said the arrangement trades a small share of the Canadian market for long-term manufacturing investment and a role in future vehicle production.

Agriculture forms the other major pillar of the deal. China will cut its tariff on Canadian canola seeds from 84 percent to about 15 percent, reopening a market that had been effectively closed. Previous duties on canola oil, meal, pork, and seafood contributed to a 10.4 percent drop in China’s imports from Canada last year.

The agreement reverses years of strained relations that began when Canada aligned with the U.S. in imposing steep tariffs on Chinese EVs, along with duties on steel and aluminum. Momentum toward reconciliation began last October, when Carney and Chinese President Xi Jinping met at a regional economic conference in South Korea.

Carney said the shift reflects a broader change in the global trade system, which he described as increasingly fragmented under pressure from the U.S. America First approach. Similar rhetoric has fueled international criticism, including recent backlash over Trump’s foreign policy remarks.

While acknowledging ongoing disagreements with China on issues such as human rights, Carney said Canada will pursue cooperation where interests align as part of its evolving trade strategy.