Canada lowers EV tariffs to boost trade ties
Canada is dramatically lowering its tariffs on Chinese electric vehicles, a move that signals a thaw in trade relations with Beijing. The Canadian government is replacing a blanket 100% surcharge with a standard trade framework under a new “strategic partnership” agreement signed in the capital. Under this deal, the tariff on Chinese EVs drops to 6.1%, matching the most favored nation rate. However, the country will impose a strict import quota, initially capped at 49,000 vehicles and rising to 70,000 over five years.
China Eases Restrictions on Canadian Exports
In exchange for the lower EV duties, China has agreed to slash its tariffs on Canadian canola seeds from roughly 84% to 15% by March 1, 2026. The Asian nation also lifted restrictions on Canadian lobster and crab exports. Prime Minister Mark Carney described the arrangement as a “reversal toward predictability,” noting that the relationship with Beijing has become more stable in recent months.
Beijing-based analyst Even Rogers Pay suggested that the government is eager to bolster its trade and investment ties with China. The country represents a massive market for Canadian farmers, especially given the current complexities in the North American trade relationship. Carney emphasized that the improved predictability with China is evident in the concrete results emerging from their recent talks.
Canada’s shift follows a similar approach taken by the European Union, which recently agreed to replace punitive tariffs on Chinese EVs with a “price undertaking” mechanism. This agreement allows the EU to phase out additional duties ranging from 7.8% to 35.3% in favor of individual price commitments. Chinese manufacturers must agree to sell their vehicles at or above a specific minimum import price to remove the injurious effects of state subsidies. The EU has indicated it will favor price offers from companies that commit to localizing production and investing in the European supply chain.
Chinese EV companies have gained significant market share in Europe even as Tesla’s sales have stagnated. Last year, BYD delivered 2.26 million battery electric vehicles, well ahead of Tesla’s 1.64 million. The Chinese automaker has now surpassed Tesla in total sales and has seen its annual revenues climb to $107 billion in 2024, a 29% year-over-year increase. Tesla’s revenue, meanwhile, was around $97.7 billion.
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China’s early and massive investment in New Energy Vehicles has paid off. While Japanese giants like Toyota focused heavily on traditional hybrids, Chinese companies like BYD and Nio built an entire ecosystem for pure electric cars. This vertical integration allows Chinese brands to produce EVs significantly cheaper than their Western or Japanese counterparts. Experts note that China can now manufacture electric cars at a lower cost than many legacy manufacturers can produce gasoline cars.
China now controls roughly 80% of the world’s battery supply chain. This dominance has allowed Chinese brands to become the most competitive car companies in the world. In 2025, nearly half of China’s auto exports were electric or plug-in hybrids, and the country officially surpassed Japan to become the world’s largest auto exporter.
BYD Surpasses Tesla in Global Sales
The growth in BYD’s sales was driven by a record number of deliveries. The company moved 4.27 million vehicles during 2024. This number was well ahead of Tesla, which saw a year-over-year decline in its deliveries. This was the first time Tesla recorded a drop in deliveries in its history. In 2011, Tesla CEO Elon Musk dismissed the idea of BYD becoming a competitor. He laughed at the prospect of the Chinese company challenging Tesla. The automaker has proven the doubters wrong and established itself as a serious rival.
Musk has recently offered high praise for Chinese EV manufacturers. He stated during Tesla’s Q4 2023 earnings call that these companies are the most competitive in the world. He predicted they would have significant success outside of China. This depends on the tariffs or trade barriers established by other nations. Musk also noted that without trade barriers, Chinese car companies would likely destroy most other global competitors. The billionaire emphasized the intense competition offered by these firms.
The nation manages roughly 80% of the world’s battery production. This dominance allows Chinese brands to manufacture electric vehicles at a lower cost. Experts attribute this efficiency to the vertical integration of the Chinese industry.
