China and Canada reached an agreement on electric vehicle tariffs

The agreement was announced at a joint press conference held after a meeting between Canadian Prime Minister Mark Carney and Chinese President Xi Jinping.

Under the agreement, Canada will remove the 100% additional customs duty imposed in 2024 on electric vehicles imported from China. Instead, a quota system will be introduced for electric vehicle imports. For Chinese origin electric vehicle imports below an annual quota of 49,000 units, a customs duty of 6.1% will apply.

China Cuts Tariffs on Canadian Exports

In return, China will reduce the 100% additional customs duties imposed on Canadian canola oil, meal, and seeds introduced in retaliation for Canada’s 2024 tariff hikes to approximately 15% as of March.

Canada Expects Investment from China

Prime Minister Carney stated that Canada needs strong partnerships and resilient supply chains to build a competitive electric vehicle sector. He noted that replacing high tariffs with a quota system would allow Canada to benefit more from cooperation that supports sectoral development, including partnerships with Chinese investors.

According to Carney, the agreement is expected to attract significant investments in Canada’s electric vehicle manufacturing over the next three years and help the country advance more rapidly toward its net zero carbon targets.

Background of the Tariff Dispute

During the tenure of former Prime Minister Justin Trudeau, Canada imposed a 100% tariff on electric vehicles imported from China and a 25% tariff on steel and aluminum products, in parallel with decisions taken by the United States under the administration of then President Joe Biden.

In response, China argued that the tariffs violated World Trade Organization (WTO) rules, filed a complaint against Canada, and launched a “discrimination” investigation. Beijing also retaliated by imposing additional duties on certain agricultural and food products imported from Canada.

Following Donald Trump’s return to the presidency in the United States, Washington’s unilateral tariff increases accelerated once again, directly affecting both China and Canada. However, the new agreement between the two countries is seen as an important step toward easing tariff tensions.