Canada told U.S. it planned to drop Chinese EV tariffs: source

Heather Wright looks at the political fallout over Canada dropping its 100 per cent tariff on Chinese EVs and how it will impact the market and consumers.

The Canadian government provided the U.S. administration with notice that it was planning to make a deal with China to reduce tariffs on some Chinese electric vehicles.

Speaking on background, a senior Canadian government official said Canada’s Ambassador to Washington Kristen Hillman was aware of the deal with China and said there were conversations with the Americans.

“We did not take anybody by surprise,” said the official, who CTV News is not naming because they were not authorized to speak publicly.

The timing of the notification remains unclear, but the source said U.S. Trade Representative Jamieson Greer was informed about Canada’s decision to introduce a quota.

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The same official said they believed U.S. President Donald Trump will eventually open the door to Chinese EVs and put in place guardrails that require the vehicles to be made in the United States.

On Friday, Trump called the Canada-China agreement a “good thing.”

“If you can get a deal with China, you should do that,” Trump said. But that optimism wasn’t shared by everyone in the administration.

“I think they’ll look back at this decision and surely regret it – to bring Chinese cars into their market,” said U.S. Transportation Secretary Sean Duffy at an event with other U.S. government officials at a Ford factory in Ohio.

Canada’s EV tariffs

In 2024, then-prime minister Justin Trudeau slapped a 100 per cent tariff on Chinese electric vehicles following a similar move by the U.S. Administration. Both counties cited concerns that cheaper Chinese-made electric vehicles would hurt the North American auto market.

In Beijing on Friday, Prime Minister Mark Carney signed what he called a landmark trade arrangement with China as part of a new five pillar strategic partnership.

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As part of that deal, many punishing Chinese agricultural tariffs were removed in exchange for Canada re-opening the door to Chinese electric vehicles.

The source said the government’s new auto strategy will be released in February. The policy, the source said, will prioritize made-in-Canada gas and electric vehicles, giving companies that build in Canada favourable market access. The strategy will also open the door to more investment from foreign automakers who want to build cars in Canada.

No Chinese cars yet

Starting March 1, 49,000 Chinese electric vehicles will be allowed to enter Canada at tariff rate of just 6.1 per cent. Officials say these vehicles are unlikely to be EVs from Chinese companies like BYD, given those cars are not yet certified by Transport Canada. That process, however, will get underway shortly.

Instead, officials say the vehicles imported into Canada in 2026 will likely be EVs made in China by North American or Asian companies. In 2023, before the 100 per cent tariff was put in place, the official said the EVs imported into Canada were largely Teslas made in China or Volvo Polestar cars made in China.

The move was met with mixed feelings as many in the auto industry called for more clarity on the deal that some experts said could damage the auto sector.

Lana Payne, Unifor national president, told CTV News Channel on Friday that she’s extremely disappointed with the deal. “We have been, for a year now, in the fight of our lives as a union to try and protect good auto union jobs in this country, and the auto sector, too,” she said. “And this deal has just made that fight a little harder for us.”

Canada expects Chinese investment

Canada expects the quota for Chinese EVs to grow as Chinese investment and partnership with auto manufacturers and dealers expand in Canada. The source said the expectation is that Chinese companies will partner with automakers in Canada to build electric vehicles, using Canadian workers, for Canadian sale and for export.

While in Beijing, Industry Minister Melanie Joly met with leaders at BYD, Chery and Magna, a Canadian company building auto parts in China.