Canada’s New Trade Deal with China

Prime Minister Mark Carney came into office with the promise to work “with urgency and determination” to diversify Canada's trade partnerships amid ongoing uncertainty from the United States. Less than a year after his election, he's taken his first major step toward that goal.

At the conclusion of a recent mission to China, Carney announced a new partnership focused on energy, agri-food, and trade with the economic powerhouse. This was the first visit by a Canadian prime minister in a decade as the two countries are rebuilding their relationship after years of strain.

China is Canada's second-largest trading partner behind the U.S. and “presents enormous opportunities” for the country, the prime minister said in a statement released on Jan. 16.

What is the trade deal between Canada and China?

The two countries struck a preliminary trade deal that includes Canada dramatically lowering its tariff rate on Chinese-made EVs and China slashing its tariff on canola seed, along with removing tariffs on certain other agriculture and food products. The initial agreement includes:

• Electric vehicles: Canada will allow up to 49,000 Chinese EVs into the Canadian market at a tariff rate of 6.1%. It's the same rate that was in place before Canada put a 100% tariff on all Chinese EVs in 2024. Not everyone is applauding the deal. Ontario Premier Doug Ford is concerned the agreement will result in a flood of “cheap” Chinese-made EVs into Canada “without any real guarantee of equal or immediate investments in Canada's economy, auto sector, or supply chain.”
• Agri-food: Canada expects China to lower tariffs on canola seed to approximately 15%, down from about 85%. The federal government also expects China to remove tariffs on Canadian canola meal, lobsters, crabs, and peas from March 1 until at least year-end. China had slapped a 100% tariff on these and other products in March last year. Carney said the deals will unlock nearly $3 billion in export orders for Canadian farmers, fish harvesters, and processors. China is Canada's second-largest global customer for agriculture, forest products, and seafood, with sales of approximately $13.4 billion in 2024, according to the federal government.
• Exports: Canada has set a goal to increase exports to China by 50% by 2030, including boosting two-way investment in clean energy and technology, agri-food, wood products, and other sectors.

Why Canada is rebuilding ties with China

Relations between the two countries have been tense amid longstanding political and diplomatic disagreements. The Jan. 16 statement from the prime minister's office described Carney's recent visit to Beijing as a “turning point in the Canada-China relationship” and said that the two countries would collaborate in “key areas of shared interest, including climate competitiveness and financial and macroeconomic stability.”

It added that Canada and China will pursue “pragmatic and constructive engagement in public safety and security,” including fighting drug trafficking, cybercrime, and money laundering.

What does the trade deal with China mean for Canadians?

Dropping tariffs on agricultural products is expected to benefit Canadian farmers, the broader agriculture industry, and the economy.

What's less clear is how allowing Chinese-made EVs into the market will affect the economy and EV prices. Critics of the deal, including Ontario Premier Doug Ford, have voiced concerns about losing Canadian auto-sector jobs. Industry watchers, including some academics and business journalists, have noted that 49,000 vehicles is a small percentage of the roughly 1.9 million cars and trucks sold in Canada in 2025—meaning it may not have a big impact on prices overall—and that the Trump administration's tariffs are arguably a bigger threat to Canada's auto sector than Chinese EV imports.

The Canadian government is hoping that the imports will lead to more opportunities. In the Jan. 16 announcement, the prime minister noted, “It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada's EV supply chain.”

Canada and China also said they would work on exploring more opportunities to increase travel exchanges and cultural ties. The prime minister's office also cited Chinese President Xi Jinping's commitment to introducing visa-free access for Canadians travelling to China.

Overcoming obstacles, but still early days

Carney recently described China as a “more predictable” trading partner than the U.S. in today's market. To further diversify Canada's trading partners, he is also pursuing commitments with Qatar and India. In December, finance minister François-Philippe Champagne visited France, Germany, and the United Kingdom to bolster Canada's relations with the European Union, which is Canada's second-largest trading partner for goods and services after the U.S.

It's early days for Canada's new trade partnerships. As anyone who has been following global affairs knows, change can happen quickly and external factors could interfere. For example, eight days after the agreement was announced, President Donald Trump threatened to slap a 100% tariff on all Canadian goods entering the U.S. if the deal with China goes ahead. In response, several Liberal cabinet ministers clarified, via social media, that Canada and China were resolving existing tariff issues, not setting up a new free-trade deal.

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