The Chinese EV import deal struck in January has now become a symbol of Canada’s determination to “choose who we trade with and what we trade,” experts say.
After Prime Minister Mark Carney stated Saturday that U.S. trade negotiators had demanded a veto over trade deals with other countries Saturday, the relatively modest Chinese EV deal, which allows 49,000 EVs into Canada this year, has taken on greater symbolic significance as a demonstration of Canada’s economic sovereignty, said Dan Woynillowicz, a climate and energy policy consultant with Polaris Strategy and Insight.
“It reaffirms the prime minister’s focus on trade diversification,” he said. “I think it does symbolize that sovereignty and the ability to choose who we trade with and what we trade.
“He said we’ve got the sovereignty to make those decisions on our own, so it would be surprising if this was walked back in the future,” Woynillowicz added.
Yet while initially seen as a gateway to making $10,000 EVs available in Canada, the deal has underwhelmed.
Import numbers published by Global Affairs Canada show 15,063 Chinese EVs have been brought into the country during the first eight months of the deal, only 31 per cent of the quota for this year.
And while most of the cars initially imported were valued at under $35,000, the majority of the EVs that arrived over the summer have been valued at higher than that mark. (The import value of the car is not the retail price offered to Canadians.)
The slow start has assuaged fears that the deal would lead to a flood of cheap Chinese EVs hitting the Canadian market, but that doesn’t mean that the deal has failed to deliver, said Travis Allan, president and CEO of the Canadian Charging Infrastructure Council.
“It takes time for companies that haven’t been operating in Canada to set up their sales, marketing and servicing operations, and to get vehicle certifications,” he said. “This isn’t a sign that the import quota isn’t working, it’s a reflection of the complexity of bringing a new make and model of automobile into an advanced regulatory market like Canada.”
The fact that almost half of the EVs imported have been above the $35,000 benchmark is “likely a reflection of the specific makes and models that could be quickly brought to market,” he said.
How the Canada-Chinese EV deal came to pass
Starting next year, the trade deal requires 10 per cent of the EVs imported fall below the $35,000 threshold, a proportion that rises to 50 per cent in the fifth year, when the overall quota will rise to 70,000.
When then-U.S. president Joe Biden announced 100 per cent tariffs on Chinese EVs in 2024, Canada matched them, erecting a prohibitively high barrier that all but ensured no Chinese manufactured vehicles would be available in North America. At the time, it was seen as a protective measure, allowing domestic auto companies to sell their EVs, which had not benefitted from lavish state subsidies like their Chinese counterparts.
But when Donald Trump re-entered the White House, his skepticism of climate change and hostility toward clean energy and technology led many American car companies to delay or scale back their EV rollouts, leaving consumers with few electric options.
Faced with a Chinese tariff on Canadian canola that was crippling Prairie farmers, the Canadian government changed tack, dropping its tariffs on Chinese EVs in exchange for a reciprocal move in China that restored canola exports. U.S. politicians expressed their displeasure, and it appeared Chinese EVs might be on the table during trade negotiations with the U.S. this summer. But that was seemingly ruled out when Carney broke off talks on Friday citing, among other factors, a U.S. demand for a veto over trade deals with other countries. (Carney did not mention the Chinese EV deal in his remarks.)
‘Canada is willing to chart its own course’
“I think Canada will stick to its agreement with China,” said Allan. “I also actually see the EV deal as being the start of hopefully a much broader economic move away from being co-dependent on the United States.
“It’s an example of how Canada is willing to chart its own course (and) is going to be striking advantageous deals with other countries so that its exposure to the U.S. becomes less and less.”
The Chinese EV import deal isn’t just about bringing more options for Canadian consumers, it’s also a “hedge on a future opportunity,” for Canadian manufacturing of Chinese EVs, said Woynillowicz.
Given that North America is the only part of the world where EV sales aren’t booming, Woynillowicz says it’s not a question of if, but when the U.S. will go all-in on electric vehicles.
“I think it’s hard to see a future in which the United States is able to withstand the global shift towards electric vehicles, given the value proposition of affordable, better cars with dramatically cheaper fuel and maintenance costs,” he said. “The North American auto sector will need to pivot to EVs and frankly Canada might be well positioned because of its arrangement with China to secure some of that investment.”
