On Friday, Canada and China reached an initial trade agreement that cuts tariffs on electric vehicles and key agricultural products, especially canola. This deal marks a clear reset in economic ties and signals a shift in Canada’s trade strategy toward its second-largest trading partner after the United States.
For years, trade tensions slowed business between the two nations. As a result, exporters, farmers, and manufacturers faced uncertainty and losses. Now, after months of diplomatic engagement, both sides have agreed to remove several trade barriers. Through this agreement, Canada aims to restore smoother trade flows, while China seeks to stabilize economic links with a major developed economy.
At the same time, the deal reflects changing global trade conditions. Canada is diversifying its trade relationships, while China is strengthening ties beyond its traditional partners. Together, these steps reshape how both countries engage economically.
Canada Cuts Tariffs on Electric Vehicles
At the center of the agreement lies a major change in Canada’s policy on electric vehicles. Canada will now allow up to 49,000 electric vehicles from China to enter the country under a tariff rate of 6.1 percent. This rate follows standard most-favored-nation trade rules.
Previously, Canada had imposed a 100 percent tariff on Chinese electric vehicles. That decision sharply restricted imports and followed similar actions taken by the United States. Before those high tariffs took effect, China exported more than 41,000 electric vehicles to Canada in 2023.
By lowering tariffs and setting a clear import quota, Canada has returned trade closer to earlier levels. However, the new policy goes further. Canada plans to raise the quota gradually over the coming years. Within five years, the annual limit is expected to reach around 70,000 electric vehicles.
This shift reflects a change in how Canada views its clean transport goals. Instead of relying mainly on protectionist measures, Canada now focuses on learning from global innovation. Officials believe access to international supply chains and affordable electric vehicles can help increase domestic demand and strengthen the local industry.
Meanwhile, this decision has sparked debate at home. Leaders in Canada’s main auto-producing regions criticized the move. They warned that cheaper imports could pressure domestic manufacturers if investments do not follow quickly. Still, the federal government moved ahead, emphasizing broader economic benefits.
At the international level, the policy also stands out. Canada’s approach differs from current U.S. trade policy on Chinese electric vehicles. Some U.S. officials expressed concern, especially ahead of a review of the North American trade agreement. Even so, public remarks from U.S. leadership supported Canada’s right to secure trade deals that benefit its economy.
Canola and Food Exports Get Long-Awaited Relief
Alongside electric vehicles, agriculture plays a critical role in the new agreement. Canadian farmers, particularly those producing canola, suffered heavily during earlier trade disputes. In response to Canada’s previous tariffs, China had imposed duties on over 2.6 billion dollars’ worth of Canadian farm and food products.
These measures targeted canola oil and meal first. Later, China added tariffs on canola seed, pushing duties as high as 84 percent. As a result, China’s imports of Canadian goods dropped by more than 10 percent in 2025, dealing a major blow to exporters.
Now, under the new deal, China plans to sharply reduce those tariffs. By March 1, Canada expects the combined tariff on canola seed to fall to around 15 percent. This change restores market access for one of Canada’s most important farm exports.
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In addition, China will remove anti-discrimination tariffs on several other Canadian products. These include canola meal, lobsters, crabs, and peas. These removals will apply from March 1 and last until at least the end of the year.
Markets reacted quickly. Canadian canola futures rose following the announcement, signaling renewed confidence among traders and producers. According to the Canadian government, these changes could unlock nearly 3 billion dollars in export orders. Farmers, fish harvesters, and food processors are expected to benefit directly.
Chinese trade authorities confirmed that they are adjusting anti-dumping and anti-discrimination measures. These adjustments directly respond to Canada’s decision to lower tariffs on electric vehicles, showing how both sides linked concessions to achieve balance.
Trade Dialogue Expands Beyond Tariffs
Beyond tariffs, the agreement signals broader cooperation. Canada and China have pledged to restart high-level economic and financial dialogue. Through this renewed engagement, both countries aim to boost trade, attract investment, and deepen cooperation across key sectors.
Agriculture remains central, yet energy and green development also feature prominently. Canada plans to double its energy grid over the next 15 years. This expansion opens opportunities for foreign participation, including partnerships in offshore wind projects.
In addition, Canada is scaling up liquefied natural gas exports to Asia. The country aims to produce 50 million tonnes of LNG annually by 2030, with all exports directed toward Asian markets. This plan strengthens Canada’s role as an energy supplier while expanding trade links across the region.
The agreement also includes a commitment from China to provide visa-free access for Canadians traveling to the country. While details remain limited, this step supports business travel, tourism, and closer people-to-people connections.
This renewed engagement unfolds during a complex period for global trade. Canada faces pressure and uncertainty in its trade relationship with the United States, including tariffs and political friction. At the same time, China is also navigating trade challenges linked to U.S. policies.
Canadian officials have described recent dealings with China as more predictable and results-focused. Analysts note that while closer ties with China could influence global trade dynamics, Canada remains deeply integrated with the United States through long-standing security and intelligence frameworks.
Through this agreement, Canada and China have reopened channels that had remained largely closed for years. By lowering tariffs on electric vehicles and canola, both countries have taken practical steps to restore trade flows, ease economic pressure, and reset a critical bilateral relationship.
