In a significant move to repair bilateral relations, Prime Minister Mark Carney has announced a major tariff agreement with Chinese President Xi Jinping during his recent visit to Beijing. This four-day trip, which concluded on Friday, marks a pivotal moment in the historically strained ties between Canada and China. The new arrangement is set to dramatically reduce tariffs on Chinese electric vehicles (EVs) and various Canadian agricultural products, creating a potential pathway for enhanced trade and investment opportunities.
Overview of the Tariff Agreement
The newly established “strategic partnership” will facilitate the entry of 49,000 Chinese EVs into the Canadian market at a reduced tariff rate of 6.1 per cent. Previously, these vehicles faced a staggering 100 per cent tariff under a policy initiated in 2024, following a trade dispute that escalated tensions between the two nations. Carney indicated that he expects the annual quota for Chinese EVs to increase by approximately 6 per cent, potentially reaching 70,000 within five years, with a portion reserved for more affordable models priced under $35,000.
In exchange, China will significantly reduce tariffs on Canadian canola seed from a combined rate of 84 per cent to around 15 per cent effective from March 1. The agreement also includes commitments from China to eliminate tariffs on Canadian canola meal, lobsters, crabs, and peas until at least the end of this year. The canola seed market is crucial for Canada, previously valued at $4 billion as of 2024, but exports have plummeted by over two million tonnes since August last year due to the lack of Chinese buyers.
Broader Implications of the Strategic Partnership
Beyond tariff reductions, the agreement signals a renewed cooperation across several sectors, including electric vehicles, energy, and agriculture. The Canadian government aims to increase exports to China by 50 per cent by 2030, promoting two-way investments in clean energy and technology, agri-food, and wood products. Furthermore, Carney revealed that President Xi has agreed to lift visa requirements for Canadians travelling to China, and plans are underway to rekindle the Canada-China Joint Committee on Culture.
Despite the optimism surrounding this partnership, significant tariffs remain in place. China continues to impose a 100 per cent tariff on canola oil, meal, and peas, alongside a 25 per cent tariff on pork and seafood products. Meanwhile, Canada maintains its own 25 per cent tariffs on certain Chinese steel and aluminium products, introduced in 2024.
Historical Context and Current Tensions
This visit was the first by a Canadian Prime Minister to China since 2017, following a period marked by profound tensions. Diplomatic relations soured dramatically in 2018 when Canada detained Chinese tech executive Meng Wanzhou, leading to the detention of two Canadians—Michael Kovrig and Michael Spavor—by Chinese authorities. They were held for over 1,000 days, returning home only after the resolution of Meng’s legal battles in September 2021.
The diplomatic fallout has been exacerbated by allegations of foreign interference, culminating in a federal inquiry that identified China as the most active perpetrator against Canadian democratic institutions. The trade war was ignited in 2024 when Canada imposed tariffs on Chinese EVs, which Beijing countered by levying tariffs on Canadian seafood and agricultural exports.
Political and Economic Reactions
The agreement has elicited a mixed response from Canadian politicians. Saskatchewan Premier Scott Moe lauded the deal as a positive development for Canada, particularly for the canola sector. Manitoba Premier Wab Kinew echoed this sentiment, while Premier Doug Ford of Ontario expressed concerns that the tariff reduction on EVs could jeopardise Canada’s automotive industry. Ford warned that this move could provoke backlash from the United States and highlighted the potential risks associated with Chinese vehicles entering the Canadian market.
Conservative Leader Pierre Poilievre questioned the consistency of Carney’s stance on China, noting his previous designation of the country as a significant security threat. He urged the Prime Minister to clarify this apparent shift towards a strategic partnership.
Industry reactions have also varied. Key stakeholders in Nova Scotia’s seafood sector welcomed the tariff reductions, which had previously inflated prices and diminished sales. Meanwhile, Unifor president Lana Payne raised alarms regarding the implications of increased Chinese imports on Canadian auto jobs, arguing that it could exacerbate existing vulnerabilities within the domestic auto sector.
Why it Matters
This new tariff agreement could herald a turning point in Canada-China relations, with implications that extend beyond mere trade figures. As Canada seeks to diversify its trade partnerships and reduce reliance on the United States, this deal demonstrates a strategic pivot aimed at bolstering economic resilience. Yet, it also raises concerns about the potential consequences for Canadian industries and the complex interplay of geopolitical interests, especially in light of ongoing tensions and domestic political pressures. As Canada navigates this new landscape, the outcomes of this strategic partnership will be crucial in shaping the future of its international trade relations.
