Canada, China reach initial trade deal on electric vehicles, canola

BEIJING – Canada and China have struck an initial trade deal to cut tariffs on electric vehicles (EVs) and canola, Prime Minister Mark Carney said on Jan 16, as both nations promised to tear down trade barriers while forging new strategic ties.

The

first Canadian prime minister to visit China since 2017

, Mr Carney was on a mission to rebuild ties with Canada’s second-largest trading partner after the US, after months of diplomatic efforts to resolve earlier tension.

Canada will initially allow in up to 49,000 Chinese EVs at a tariff of 6.1 per cent on most-favoured nation-terms, Mr Carney said after talks with Chinese leaders, including Chinese President Xi Jinping. He did not specify a time period.

“This is a return to levels prior to recent trade frictions, but under an agreement that promises much more for Canadians,” he told reporters in Beijing.

The figure compares with a 100 per cent tariff on Chinese EVs imposed by the government of former prime minister Justin Trudeau in 2024, following similar US penalties. In 2023, China exported 41,678 EVs to Canada.

Mr Trudeau justified the tariff on the grounds of an unfair global market edge for Chinese manufacturers benefiting from state subsidies, a scenario threatening to domestic industry.

“For Canada to build its own competitive EV sector, we will need to learn from innovative partners, access their supply chains and increase local demand,” Mr Carney said.

He pointed to a stronger partnership with China in clean energy storage and production, driving new investments.

Mr Carney said he expected the EV pact would drive “considerable” Chinese investment into Canada’s car sector, create good careers in Canada and speed it towards a net-zero future.

In March, in retaliation for Mr Trudeau’s tariffs, China levied tariffs on more than US$2.6 billion (S$3.4 billion) of Canadian farm and food products, such as canola oil and meal, followed by tariffs on canola seed in August.

That led to a slump of 10.4 per cent in China’s 2025 imports of Canadian goods.

Under the new deal, Mr Carney said, Canada expects China will lower tariffs on its canola seed by March 1, to a combined rate of about 15 per cent.

“This change represents a significant drop from current combined tariff levels of 84 per cent,” he said, adding that China was a US$4 billion canola seed market for Canada.

In addition, Canada expects its canola meal, as well as lobsters, crabs, and peas to be freed from anti-discrimination tariffs from March 1, until at least year-end, he added.

The deals will unlock nearly US$3 billion in export orders for Canadian farmers, fish harvesters, and processors as they realise the full potential of the Chinese market, Mr Carney said.

In a joint statement announced by China’s state-run Xinhua news agency, the two countries pledged to restart high-level economic and financial dialogue, boost two-way trade and investment, and strengthen cooperation in agriculture, oil, gas and green energy.

Mr Carney said Canada will double its energy grid over the next 15 years, adding that there are opportunities for Chinese partnership in investments including offshore wind. He also said Canada was scaling up its liquefied natural gas (LNG) exports to Asia and will produce 50 million tonnes of LNG each year, all destined for Asian markets by 2030.

China ‘more predictable’

“Given current complexities in Canada’s trade relationship with the US, it’s no surprise that Carney’s government is keen to improve the bilateral trade and investment relationship with Beijing, which represents a massive market for Canadian farmers,” said Beijing-based Trivium China’s Even Rogers Pay.

“Meanwhile, it’s difficult for Washington to criticise Carney for striking a beneficial trade deal when Trump himself just did so in October.”

Canada is strengthening ties with the world’s second-biggest economy after US President Donald Trump imposed tariffs on some of its goods and suggested the long-time US ally could become the country’s 51st state.

China, similarly hit by Mr Trump’s tariffs since he returned to the White House in 2025, is also keen to cooperate with a Group of Seven nation in a traditional sphere of US influence.

“In terms of the way our relationship has progressed in recent months with China, it is more predictable, and you see results coming from that,” Mr Carney said in response to media queries whether it was a more predictable and reliable partner than the US.

Mr Carney also said he had discussions with Mr Xi about Greenland. “I found much alignment of views in that regard,” he said.

Mr Trump has in recent days revived his claim to the semi-autonomous Danish territory as NATO members scrambled to counter US criticism that Greenland is under-protected.

Analysts say the rapprochement could reshape the political and economic context in which the Sino-US rivalry unfolds, although Ottawa is not expected to dramatically pivot away from Washington.

“Canada is a core US ally and deeply embedded in American security and intelligence frameworks,” said Dr Sun Chenghao, a fellow at Tsinghua University’s Centre for International Security and Strategy.

“It is therefore very unlikely to realign strategically away from Washington.”

But if Ottawa took a more pragmatic and autonomous economic policy toward China, Beijing could point to it as evidence that US-led decoupling was neither inevitable nor universally accepted among America’s closest partners, he added. REUTERS