Only a couple of weeks ago, Canada and China signed a historic tariff relief accord. This breakthrough was the result of a high-stakes meeting between Canadian Prime Minister Mark Carney and Chinese officials. More broadly, this deal recalibrates US-China trading relations. It eliminates tariffs on electric vehicles (EVs) and agricultural products, marking a historic turning point in Canada’s foreign policy priorities.
While in China, Carney negotiated an agreement that substantially reduced Canada’s import tariffs on Chinese EVs. They now fall from an incredible 100% all the way down to a mere 6.1% for the first 49,000 vehicles imported annually. Unintended consequences This move will now have the effect of opening the Canadian market wide to Chinese electric vehicles. In the end, consumers in Canada will likely enjoy lower prices. Most strikingly, China continues to maintain an iron grip on global EV production, controlling more than 70% of global production.
At the same time as their FIPA announcement, China agreed to make big cuts in tariffs on Canadian ag exports. By March 1, 2024 Canada will lower and bind their tariffs on canola seed to a level of approximately 15%. This would be a dramatic decrease from today’s level of 84%. Furthermore, China agreed to eliminate tariffs on Canadian canola meal, lobsters, crabs, and peas until at least the end of the year.
Complementing the bilateral initiative, the new agreement features the abolition of visa requirements for Canadian visitors to China, creating even more momentum for bilateral relations. Under the terms of the deal, the cap on Chinese EVs in Canada would increase to 70,000 over five years.
Speaking at the announcement of the deal, Carney stated that the face of international relations is changing. He stated, “The world has changed in recent years, and the progress made with China sets Canada up well for the new world order.” He emphasized that Canada operates within the realities of global politics, saying, “We take the world as it is, not as we wish it to be.”
Despite these positive developments, the agreement has generated concern on the home front and abroad. Most notably, perhaps, was the reaction from Ontario Premier Doug Ford, who denounced the deal in no uncertain terms. He warned that such an influx of imported vehicles “would hurt our economy and lead to job losses,” arguing that it risks inviting “a flood of cheap made-in-China electric vehicles without any real guarantees of equal or immediate investment in Canada’s economy.”
For Canada’s trade relations, this deal represents a leap forward. It lays the groundwork for a more equitable, reciprocal relationship with China. Former U.S. President Donald Trump previously endorsed such negotiations with China, stating, “If you can get a deal with China, you should do that.” He further encouraged openness to foreign investments by saying, “If they want to come in and build a plant and hire you and hire your friends and your neighbours, that’s great, I love that.”
Cheaper EVs and more ag exports have some Canadians looking forward to the deal. As they go about these new pacts, many of their counterparts fear the consequences of closer relations with China, particularly in light of long-standing human rights abuses in that country. The deal follows Carney’s declaration in March 2022 that China was the “most significant threat to global security” that Canada faces.