Canada has reopened the doors of electric vehicles from China, giving a radical turn to its trade policy. Last Friday, Prime Minister Mark Carney reduced tariffs by 100% to 6.1%, which could take the Canadian automobile market to a new horizon. Below these lines we tell you what this may imply.
Change. The move comes a year after Canada impose massive tariffs to Chinese electric vehicles, following in the footsteps of the United States under the Biden administration. The argument, as describe from the BBC, was that they considered China to be carrying out ‘a policy of deliberate overproduction’.
Now, with relations between Canada and the United States on somewhat delicate ground under the Trump administration, the Canadian government has chosen to diversify its trade alliances. “We take the world as it is, not as we would like it to be,” counted Carney.
Quantities. The initial agreement allows the entry of up to 49,000 electric vehicles annually from China with the reduced tariff of 6.1%. This figure represents approximately 3% of the total Canadian market, which is around two million vehicles per year, according to account the Driving medium.
According to the prime minister, the quota could increase to 70,000 vehicles within five years. Furthermore, the agreement stipulates that, in that period, more than 50% of these vehicles must be affordable models with an import price of less than 35,000 Canadian dollars (about 21,569 euros at the exchange rate).
Date. Although there is no exact confirmed date, several media predict its arrival in the coming weeks. Addisu Lashitew, associate professor at the DeGroote School of Business at McMaster University, counted to the CBC that Chinese manufacturers have the capacity to accelerate production and ship quickly. BYD, the largest Chinese manufacturer of electric vehicles, even operates its own cargo ships, which could shorten shipping times even further.
Brands that will arrive first. Curiously, the first brands to benefit from this opening will not necessarily be the purely Chinese ones. Tesla is in a prime position to take advantage of the deal immediately, according to they count from Reuters. Elon Musk’s company had already equipped its Shanghai plant in 2023 to manufacture a specific version of the Model Y destined for Canada, exporting more than 44,000 vehicles that year before the 100% tariffs came into effect.
Other brands with a previous presence include Volvo and Polestar, both owned by the Chinese group Geely. For purely Chinese brands like BYD or Nio, the process will be somewhat slower, as they will have to establish dealer networks, service chains and spare parts markets from scratch.
Disparate political reaction. The Premier of Saskatchewan (province of Canada), Scott Moe, celebrated the agreement as “very good news,” especially since China has committed to reducing tariffs on Canadian agricultural products such as rapeseed.
However, Ontario Premier Doug Ford critical harshly criticized the move, calling Chinese electric vehicles “subsidized spy cars” and warning that the deal would “damage our economy and lead to job losses.” To put it in context, Ontario is the province where the Canadian automobile industry is concentrated.
The US response. United States Trade Representative Jamieson Greer qualified the agreement “problematic” and warned that Canada might regret it. However, President Trump declared that it was “a good thing” and that “if you can get a deal with China, you should do it.”
The reflection of Japan. In 1981, Canada reached a similar agreement with Japan, allocating unit quotas instead of prices. The result was that Japanese manufacturers simply moved up the range: Civics became Accords, Corollas became Camrys. In two or three years, the average price of an imported Japanese car went from $8,000 to $14,000, as remember Greig Mordue, director of the Master of Engineering and Public Policy program at McMaster University, told Driving.
However, that agreement also led to Honda and Toyota establishing production plants in Canada, today becoming the two largest vehicle manufacturers in the country. In fact, according to revealed A senior Canadian official told the CBC, the government wants to explore the idea of creating joint ventures and investments with Chinese companies in the next three years to build a Canadian electric vehicle with Chinese know-how.
More competition. Lashitew emphasize that the entry of cheaper Chinese vehicles will force other manufacturers to lower their prices, which would make electric vehicles more accessible to consumers and help Canada move toward its emissions reduction goals. “With electric vehicles still 30% to 50% more expensive than comparable gasoline cars, reducing trade barriers would significantly ease the affordability constraint,” he noted.
Cover image | aboodi vesakaran and Xataka
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