Canada and China Agree to Slash Tariffs on Electric Vehicles and Agriculture in Strategic Reset
Beijing, Sunday, 18 January 2026.
Canada will drastically cut tariffs on 49,000 Chinese electric vehicles from 100 percent to 6.1 percent, a pivotal move to diversify trade and stabilize bilateral economic relations.
A Calculated Exchange of Access
This targeted tariff reduction, scheduled to take effect on March 1, 2026, is part of a broader reciprocal arrangement reached during Prime Minister Carney’s official visit to Beijing from January 14 to 17 [1][2]. Under the terms of the deal, Beijing will reciprocate by eliminating its 100 percent tariff on Canadian canola meal and slashing the duty on canola seed from 85 percent to 15 percent [1], a reduction of 70 percentage points. Additionally, the agreement includes a provision allowing Canadian tourists to visit China without a visa, further signaling a thaw in diplomatic exchanges [1].
Diversifying Beyond the North American Bloc
The impetus for this strategic pivot lies in Canada’s urgent need to reduce its economic dependence on the United States. In 2024, the U.S. absorbed 75 percent of Canadian goods, whereas China accounted for less than 4 percent of Canadian exports [3]. Prime Minister Carney has articulated a goal to double Canada’s non-U.S. exports by 2035, a target that necessitates renewed engagement with the world’s second-largest economy [3][5]. This shift comes as Canada seeks to adapt to new global realities and diversify its trade links following recent tariff volatilities [3].
Institutionalizing the Reset
Beyond immediate tariff adjustments, the leaders have committed to reinvigorating the institutional framework that governs bilateral economic activity. Both nations agreed to restart the Canada-China Economic and Financial Strategic Dialogue (EFSD) and the Joint Economic and Trade Commission (JETC), mechanisms designed to address trade issues through constructive consultation rather than confrontation [2]. Furthermore, a Financial Working Group has been established, and the bilateral currency swap arrangement between the Chinese Yuan and Canadian Dollar has been extended and amended [2].
A New Chapter in Diplomacy
The summit in Beijing, which included meetings with President Xi Jinping and Premier Li Qiang, marks the first visit by a Canadian leader to China in nearly a decade [2][5]. President Xi noted that the meetings have opened a “new chapter” in bilateral relations, emphasizing that stable development serves the common interests of both nations [3][4]. This rapprochement follows a period of strained ties dating back to 2018, suggesting a mutual willingness to move past previous diplomatic freezes and focus on pragmatic cooperation in sectors such as energy and agriculture [3][4]. Following the conclusion of talks in Beijing, the Canadian delegation departed for Doha, Qatar, on January 17 [1].