China and Canada strike roadmap to reset trade ties after years of fallout

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China and Canada strike roadmap to reset trade ties

Canada loosens EV pressure while protecting steel and industry leverage

The core concession from Ottawa is a targeted reopening of Chinese EV imports, shifting from a punitive tariff regime toward limited access under quotas. Canada will restore most-favored nation rates for an annual quota of Chinese EVs, lowering the effective tariff from triple-digit levels to 6.1% on allowed volumes — a sharp reversal from the hard-line stance taken in 2024. By reserving a growing share of the quota for “affordable” vehicles under CAD 35,000, the government is trying to balance consumer demand with political optics around industrial protection.

At the same time, Canada is extending suspensions on certain steel and aluminum tariffs through 2026, but only for products with limited domestic availability, signaling that tariff tools remain on standby. In practice, this is not a full retreat — it’s a controlled easing designed to attract joint ventures and improve EV supply-chain resilience while keeping leverage over Chinese industrial imports. The broader trend is clear: Canada is still willing to deploy tariffs as industrial policy, but is now carving out exceptions when domestic inflation, affordability, or strategic investment goals require flexibility. The EV quota framework also creates a precedent that other “sensitive” sectors could follow: reopen trade, but only under strict guardrails.

China eases farm tariffs, but the relationship remains fragile

In exchange, Beijing is signaling relief for Canadian agriculture — especially canola, which has become the most politically sensitive commodity in the standoff. China plans to reduce punitive tariffs on Canadian canola seeds and remove anti-discrimination duties across categories including canola meal and seafood products, opening the door to a partial recovery in shipments. For Canada, that matters because China is not just another buyer — it has historically been the dominant market for key canola exports, and tariff spikes have shown how quickly the sector can be destabilized.

The proposed reductions would help ease pressure on farmers and exporters heading into 2026, but the structure of the agreement suggests the recovery may be staged and conditional. Beijing’s previous use of anti-dumping measures, security deposits and retaliatory tariffs shows that agricultural access can still be weaponized if political tensions flare again. In that sense, the deal does not eliminate risk — it simply reduces it for now, offering a path for gradual normalization if both sides keep incentives aligned. The bigger takeaway is that the relationship is moving from confrontation toward controlled coexistence: trade flows may resume, but under the constant shadow of policy reversals.

Recently we wrote that the U.S. economy reached a two-year high in the third quarter, expanding by 4.4%, effectively cementing expectations that the Federal Reserve will keep interest rates unchanged at its January 28 meeting.

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