Canada has agreed to allow a maximum of 49,000 Chinese-made electric vehicles to enter the Canadian market annually at a most-favored-nation tariff rate of 6.1%.
This policy marks Canada’s termination of the 100% additional tariff measure on Chinese electric vehicles that had been in effect since October 2024, shifting instead to a tariff-rate quota system. Carney stated that this move aims to restore normalized levels prior to trade friction, with the relevant volume accounting for less than 3% of Canada’s new vehicle market sales.
High tariffs had caused electric vehicle prices to soar and limited options in the Canadian market. According to Statistics Canada data, new registrations of zero-emission vehicles declined significantly in the third quarter of 2025. This tariff adjustment is expected to bring more affordably priced electric vehicle models to Canadian consumers. It is projected that within five years, over 50% of Chinese electric vehicles imported to Canada will be priced below CAD 35,000 ($25,300 USD), offering consumers low-cost alternatives. Meanwhile, Canada expects that within three years, the agreement will drive Chinese enterprises to establish joint ventures in Canada, promote the development of the domestic electric vehicle supply chain, and create employment opportunities for Canada’s automotive manufacturing industry.
Source: ACT Read The Article
PSR Analysis: Canada’s dramatic reduction of electric vehicle tariffs from 106.1% to 6.1% signifies a critical breakthrough for China’s new energy vehicle industry in breaking Western trade barriers and expanding global markets. This policy pivot not only ends the 100% additional tariff imposed since October 2024 but also establishes a clear, predictable pathway for export growth through a tariff-rate quota system. The sharp drop in marginal costs directly translates into end-price advantages: for instance, the BYD Seal’s price could fall from CAD 80,000 to approximately CAD 50,000—a 40% reduction—precisely targeting the affordable market segment below CAD 35,000.
The agreement mandates that within five years, over 50% of Chinese EVs imported to Canada must be priced under CAD 35,000, a hard constraint that will compel Chinese companies to deeply leverage economies of scale and supply chain integration, further consolidating their core “high cost-performance” competitive edge.
Although the first-year quota is only 49,000 units—less than 3% of Canada’s new car market—industry analysis predicts Chinese automakers could capture roughly 10% of Canada’s EV market share, far exceeding the quota and underscoring both market potential and competitiveness.
More strategically, the agreement explicitly promotes Chinese enterprises to establish joint ventures in Canada within three years. This dual “technology + capital” overseas expansion model mirrors BYD and CATL’s capacity deployment in Hungary and Thailand, aiming to circumvent future trade policy risks through localized production.
Moreover, with Canada’s abundant lithium and nickel resources, the joint venture model can create a vertically integrated “resources-manufacturing-market” enhancing global supply chain resilience while deeply binding China’s industrial advantages with Canada’s resource strengths. This creates mutually beneficial strategic synergies and opens a new paradigm for the globalization of China’s new energy vehicle industry. PSR
Jack Hao, Senior Research Manager – China represents Power Systems Research
