Tariffs and trade
Trump threatens Canada with 100% tariff if it “makes a deal with China”, CVMA expresses concern over tariff reductions for Chinese EVs
In a social media post, US president Donald Trump issued a threat that the US would impose a 100% tariff on the import of all goods from Canada to the US “immediately” if the country “makes a deal with China”. This comes shortly after an agreement was reached on a “strategic partnership” between Canada and China that saw a tariff reduction for Chinese EV imports to Canada – a move that has been criticised by the Canadian Vehicle Manufacturers’ Association (CMVA), which represents Ford, General Motors and Stellantis in Canada.
Responding to an article about the trade agreement brokered between Canadian prime minister Mark Carney and Chinese president Xi Jinping that saw Canada remove its 100% surcharge on the import of Chinese EVs, Trump claimed in a post on Truth Social that “if Canada makes a deal with China, it will immediately be hit with a 100% tariff against all Canadian goods and products coming into the USA”.
It is unclear whether the “deal” Trump referred to in this post is the recently announced agreement between the two countries or a subsequent and more comprehensive trade deal.
Trump initially said the agreement was “a good thing” for the Canadian prime minister to do, telling Carney: “If you can get a deal with China, you should do that.”
This pivot from US support for Canada-China trade to a rapid escalation with tariff threats highlights the precariousness of international trade today, even within North America – something that will no doubt be a key theme throughout 2026 as negotiations surrounding the future of the US-Canada-Mexico Agreement (USMCA) ramp up.
Speaking to members of the press in Ottawa on January 25, Carney responded to Trump’s tariff threat, claiming Canada respects the commitments it has made in the US-Canada-Mexico Agreement (USMCA) and does not intent to breach them. “We have commitments under [the USMCA] not to pursue free trade agreements with non-market economies without prior notification,” he said. “We have no intention of doing that with China or any other non-market economy.”
He continued: “What we’ve done with China is to rectify some issues that developed in the last couple of years – in many ways we’re going… back to the future with respect to EVs… but with additional protections.”
One of these additional protections that Carney was referring to was the decision to introduce a cap on the number of tariff-exempt EVs that can be imported from China – that cap has been set at 49,000 which Carney previously outlined is related to “volumes in the year prior to recent trade frictions on these imports.”
Another is the understanding that in five years’ time, 50% of the Chinese EVs entering the Canadian market will be affordable – something Carney believes will create new lower-cost options for Canadian consumers.
Furthermore, over the next three years, the Canadian government expects this agreement will “drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain”.
Canada’s auto industry expresses scepticism over decision on Chinese EVs
The American Automotive Policy Council (AAPC) and the Canadian Vehicle Manufacturers’ Association (CVMA), which represent the public policy interests of Ford, General Motors and Stellantis in the US and Canada have issued a statement expressing concern over the removal of tariffs for Chinese EVs.
In the statement, the two bodies expressed concern that this “has the potential to undermine Canada’s auto sector and presents risks to the future of the integrated North American auto supply chain.”
Speaking to CTV News, president and CEO of the CVMA Brian Kingston elaborated on this further, saying that reducing tariffs for Chinese EVs “cannot even be contemplated in this current environment.”
He explained that by introducing the 100% tariff on Chinese EVs in the first place, Canada aligned its policy with the US and undoing that action could threaten trade negotiations between the US and Canada at “a very sensitive point in discussions” between the two nations.
“Canada and the auto industry depends and always will depend on our access to the United States,” he added. “If we threaten that relationship by doing something and opening the door to China, our broader economy is going to be at severe risk.”
Kingston also touched on the impact of allowing more Chinese EVs into Canada on the country’s domestic auto industry, saying that Chinese subsidies for EV manufacturing “does not allow for a level playing field”.
CVMA calls for Canada to reassess ZEV mandate
In December, the CVMA wrote to the Canadian prime minister urging him to repeal Canada’s Electric Vehicle Availability Standard (EVAS) and “focus efforts on supporting the industry and consumers”.
The EVAS sets out zero-emission vehicle (ZEV) targets for auto manufacturers and importers, beginning at 20% of new vehicle sales in 2026 and rising to 60% in 2030, then 100% in 2035.
The letter was signed by: Beverly Goodman, president and CEO of Ford Motor Company of Canada; Kristian Aquilina, president and managing director of General Motors Canada; and Trevor Longley, Canada president at Stellantis North America.
They highlighted “unprecedented headwinds” facing Canada’s automotive industry, including US tariffs, USMCA uncertainty and slowing demand for ZEVs.
“In the face of these challenges, we must do everything possible to enhance Canada’s competitiveness as an auto manufacturing jurisdiction,” the letter read. “This will both secure existing automotive manufacturing and research operations and ensure Canada remains attractive for future job-creating investments.”
The CVMA outlined its belief that “redundant and costly regulations like EVAS are putting unnecessary strain on the auto industry at the worst possible time”, noting that forcing automakers to restrict the sale of ICE and hybrid vehicles manufactured domestically has the potential to harm Canada’s auto manufacturing footprint and impact the thousands of Canadian’s employed by the sector and its supply chain.
