When Prime Minister Mark Carney announced a new “strategic partnership” with China in January, the headline sounded diplomatic. The details, however, landed like a gut punch for Canada’s auto sector.
At the centre of the deal is a major shift in tariff policy on Chinese electric vehicles. Ottawa says it will allow up to 49,000 electric vehicles built in China to enter Canada at the standard vehicle tariff rate of 6.1 per cent, rolling back the 100 per cent surtax imposed just over a year ago. This vehicle quota—understood to be a ‘hard’ quota—is expected to gradually rise over time, with certain annual volumes reserved for “affordable” cars (i.e. those with an “import price” of $35,000 or less, before taxes, freight and other charges are applied).
For Canadian autoworkers already reeling from U.S. trade aggression, idled plants, and stalled EV investment, this deal creates new vulnerabilities at precisely the wrong moment as my union, Unifor (Canada’s largest private sector union, and the country’s pre-eminent autoworkers union), has pointed out.
Until now, Canada’s tariff policy on Chinese cars mirrored that of the United States. In October 2024, Ottawa imposed a 100 per cent surtax on Chinese EVs under section 53 of the Customs Tariff, bringing total duties to 106.1 per cent. This followed an imposition of 100 per cent tariffs on Chinese EVs by the Biden Administration, under section 301 of the 1974 Trade Act. The intent of both moves was clear: prevent a surge of heavily subsidized Chinese vehicles from overwhelming the North American market while Canadian and U.S. assembly plants retooled for EV production.
That tariff policy alignment mattered. For six decades, since the 1965 Canada-U.S. Auto Pact, Canada and the United States have operated within a deeply integrated auto industry, with shared regional supply chains and interdependent production. Canadian policy has long recognized that protecting domestic capacity requires coordination with our largest trading partner.
China, meanwhile, is not a normal trading partner. Its auto industry is the product of deliberate state controls, deplorable labour conditions and structural overcapacity. Electric vehicles and their key components (e.g. battery cells) have been a strategic priority for government since at least 2013. Chinese automakers are encouraged to produce far more vehicles than their domestic market can absorb, then export the excess.
This isn’t competition, it’s market distortion. Canadian regulators are working constantly to control the flow of low-cost Chinese imports on a range of products, like steel, guarding domestic industries against unfair practices and injury. China is among the world’s worst offenders of dumping.
In the case of vehicles, if low-priced imports flood domestic markets, the risk is that legacy automakers retreat from building vehicles in segments on which they cannot compete—shrinking local production, hollowing out supply chains and negatively affecting jobs.
Ottawa has tried to minimize the political blowback of this China deal, claiming the quota represents just three per cent of annual vehicle sales. That figure is misleading. It compares Chinese EV imports to total vehicle sales in Canada, including gas-powered trucks and SUVs. Measured against the EV market alone, 49,000 vehicles represent roughly 20 per cent of new EV and hybrid sales, based on 2025 sales data.
With EV demand weakened by a temporary rollback of consumer purchasing incentives and gaps in charging infrastructure (only recently reinstated as part of the feds’ new auto strategy), Chinese imports could soon account for as much as 30 per cent of the EV market. This ratio far exceeds other automaking regions, like Europe, where Chinese automakers have wreaked havoc on auto supply chains and local jobs, albeit accounting for only 16.5 per cent of the EV sales market. In Mexico, a Chinese vehicle import surge (that started as a trickle) forced government to safeguard its domestic auto industry by raising import tariffs to 50 per cent.
The concerns for autoworkers are even more acute. Once Chinese automakers have set in place Canadian retail and afterparts networks, they will be given clearance to supply unlimited quantities of vehicles from numerous factories outside China, at standard or even zero tariffs, sidestepping the quota altogether. Canada must establish rigorous monitoring and authentication protocols to avoid import surges, and trans-shipment of Chinese vehicles through other countries.
Some argue the deal will attract new investment, although there is no evidence to support this claim. Lowering tariffs typically reduces, not increases, the incentive to build vehicles in Canada. Opportunities for Chinese automakers to use global factories to bypass Canada’s quotas will not help either. Without direct access to the U.S. market, and with Chinese connected-vehicle technology barred from U.S. entry starting in 2027, there is hardly a credible business case for full-scale Chinese assembly plants in Canada. At best, we may see small-scale “knock down kit” (i.e. reassembly) operations which are a common practice for Chinese automakers, generating a fraction of the jobs and no comparable supply-chain benefits to existing assembly plants in Canada. The federal government must be diligent and clear-eyed in its negotiating with Chinese automakers, to avoid weak investment deals that deliver minimal benefits to the Canadian economy.
All of this comes as Canada’s auto sector faces an existential crisis. The stakes are incredibly high. U.S. tariffs are already damaging auto supply chains on both sides of the border, and Trump’s EV policy pullback has killed planned investments across the region. In Canada, three major assembly plants sit idle (GM Ingersoll, Stellantis Brampton and Ford Oakville, although Oakville production will restart in 2026). Honda has postponed a major EV investment. Other factories are under-utilized, as production volumes drop. Thousands of supplier jobs have been cut. More than one-third of Unifor’s entire membership at the Detroit Three is currently on layoff. These are not abstract risks—they are lost paycheques and destabilized communities.
Diversifying trade matters. But diversification that undermines domestic production is not strategy, it’s surrender. Canada needs a coherent auto strategy built on a simple principle: if you want to sell vehicles in Canada, you should build them here. The contours of this can be found in the federal government’s recently announced auto strategy, which appears hopeful, but details on key features of the strategy remain unclear.
Canada must prioritize finding solutions for idled plants in Ingersoll and Brampton and use dedicated funds to secure production. It means aligning EV incentives, tailpipe regulations and trade policy around the goal of building a future-facing auto industry that can make the shift to zero emission vehicles with good, unionized jobs. It means applying a stronger tariff remission framework to all automakers that rely on global import sales, with no return investments and job creation in Canada. And, of course, it means continuing to press the United States to end its mutually destructive tariff policy.
Canadian officials would be wise to contain the unintended spread of cheap Chinese EVs, or risk undoing its own auto industry strategy. If one thing is clear, its that Canada cannot import its way to a net-zero future. It must build it here at home.
