Auto Industry Warns Carney’s China Tariff Deal Could Undermine Competitiveness
Auto industry leaders and experts are warning that Prime Minister Mark Carney’s deal to reduce tariffs on Chinese-made electric vehicles could put the competitiveness of the Canadian auto sector at risk and complicate trade negotiations with the U.S.
On Thursday, Prime Minister Mark Carney reached a deal with China to allow 49,000 EVs made in the country into Canada at a low tariff rate in return for big reductions in Beijing’s levies on canola seed and a promised elimination of its tariffs on a host of other Canadian-made products.
As of March 1, Canada will lower levies on Chinese EVs from 100 per cent to 6.1 per cent. The quota would reach 70,000 EVs in half a decade, with a portion of that quota reserved for cars with an import price of $35,000 or less.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the deal risks undermining Canadian jobs. While the 49,000 cap represents just 3 per cent of total annual auto sales in Canada, it also represents a full shift in an assembly plant for 1,000 employees and several thousand more in the supply chain, he said.
“Every sale made guaranteed to an export source is a sale that doesn’t include Canadian content,” he said.
Additionally, it puts Canada on weaker footing as it approaches the upcoming renegotiation of the United States-Mexico-Canada Agreement this year. While Canada exports 50 per cent of its cars to the U.S., he said, there is no export opportunity to China.
“Any time you’re risking 50 for zero, you better have a pretty good reason,” he said.
These risks are somewhat mitigated by a number of guardrails that Canada must now uphold, he said. Those include, in addition to the cap of 49,000, a third-year review linked with pledges that China will make joint-venture auto investments in Canada within three years.
David Adams, head of Global Automakers of Canada, which represents Toyota Motor Corp. TM-N, Honda Motor Co. Ltd. HMC-N and several other overseas brands, also expressed concern that the deal could interfere with upcoming trade negotiations.
The deal “is a departure from the government’s position and concerns regarding Chinese EVs, and it is now different than the U.S.,” he said.
In a release, Unifor national president Lana Payne called the agreement “a self-inflicted wound to an already injured Canadian auto industry,” and said that providing access to cheap Chinese EVs, “backed by massive state subsidies,“ would reward labour violations and unfair trade practices.
Other experts took a more positive view of the deal. In a note to investors, Bank of Nova Scotia head of capital markets economics Derek Holt said the deal will offer immediate, modest and concentrated economic benefits to Canada.
Most of the nearly immediate benefits will flow through to the agricultural and seafood sectors, he said, and medium- and long-term benefits could include investment by China in sectors such as autos, energy and clean technology.
“To be sure, there are risks aplenty. One is implementation risk on the long road ahead, to which we can only say time will tell,” Mr. Holt said.
As for U.S.-Canada relations, he said that Canada has no choice but to broaden its relations considering the “increasingly protectionist and isolationist” American stance. “If a main goal of U.S. isolationism was to thwart China’s ambitions, then it’s failing.”
Dimitry Anastakis, professor of Canadian business history at the Rotman School of Management, said the incoming EVs will likely have minimal impact on existing local production and sales, given that there is little overlap with the types of cars that are made here. Of all the manufacturers, Honda and Toyota are most likely to see some erosion of sales, he said.
He added that it makes sense for Canada to diversify its trade while providing consumers with more options.
“The Trump administration has no strategy besides ripping stuff up and going back to some imagined past that never existed,” he said. “Why would we maintain that?”
U.S. Trade Representative Jamieson Greer said on Friday the Canadian government’s decision is “problematic” and that Canada may come to regret the decision.
Speaking with reporters outside the White House Friday Morning, President Donald Trump appeared to take a different tone, calling the deal “a good thing,” saying that it’s what Mr. Carney should be doing. “If you can get a deal with China, you should do that,” he said.
However, speaking at a Detroit auto plant two days ago, Mr. Trump said that the USMCA is “irrelevant” for the U.S., and he pushed for American companies to bring manufacturing south of the border.
The deal was applauded by think tank Clean Energy Canada, which said that it would help reverse a trend of declining EV sales in Canada. That decline followed the end of a federal rebate for EV buyers, the enactment of tariffs on Chinese EVs and the government’s postponement of zero-emission vehicle sales targets, said executive director Rachel Doran.
The change will provide a more affordable option for buyers, while sending a strong market signal to other automakers to price their cars accordingly, she said. A study in the fall of 2025 by the think tank found only one EV model available for sale under $40,000 in Canada, compared to 21 in the European Union.
With reports from Sean Silcoff and Reuters
This article was first reported by The Globe aned Mail
