Canada, China, and the US 

Diya Ravi

January 16, 2026

A shift in foreign trade policy has occurred as Canada has decided to ease its tariffs on Chinese electric vehicles in exchange for reduced Chinese tariffs on Canadian agricultural products. This marks a significant shift in both foreign and trade policy, signaling a move to diversify partnerships and causing uncertainty with the United States. 

On Friday, the deal announced high-level talks between Prime Minister Mark Carney and Chinese officials. This deal will allow Canada to lower its tariffs on Chinese-made electric vehicles from 100% to 6.1% for an initial quota of 49,000 vehicles per year. Since this is a deal, in return, China will reduce tariffs on Canadian exports, including canola seeds, canola meal, lobster, crab, and peas. 

Experts say the deal underscores Canada’s growing willingness to act independently rather than align automatically with Washington. “The prime minister is signalling that Canada has agency,” said Eric Miller, president of the Rideau Potomac Strategy Group. “Canada is preparing for the possibility that its trade relationship with the US may continue to deteriorate.”

Since returning to office, US President Donald Trump has imposed tariffs on Canadian metals and automotive products and has threatened to withdraw from the US-Mexico-Canada Agreement (USMCA), which is currently under mandatory review. This has fuelled economic uncertainty, particularly in Canada’s manufacturing sector.

Reaction within Canada has been mixed. Saskatchewan Premier Scott Moe welcomed the deal, saying it would provide relief to farmers hit hard by China’s earlier retaliatory tariffs. However, Ontario Premier Doug Ford warned that lowering EV tariffs could harm Canada’s auto industry and lead to job losses, calling the move an invitation for “a flood of cheap Chinese vehicles.”

Economists note that China currently dominates the global EV market, accounting for roughly 70% of worldwide production. With lower tariffs, Chinese automakers are expected to capture around 10% of Canada’s EV market, increasing competition for US-based manufacturers such as Tesla.

The White House response has also been divided. US Trade Representative Jamieson Greer called the agreement “problematic,” while Trump himself described it as “a good thing,” saying countries should pursue deals that benefit their economies.

Carney has argued that Chinese EVs are among the most affordable and energy-efficient in the world and suggested the agreement could encourage Chinese investment in Canada’s automotive sector, though no specific commitments were announced.

For now, analysts say the deal reflects Canada’s effort to hedge against an uncertain future in North American trade, one that may require deeper engagement beyond its traditional allies.