In a strategic response to President Donald Trump’s tariff policies, Canada has devised an innovative approach by welcoming Chinese car manufacturers with open arms.

While American automakers are scaling back their presence in Canada, the Canadian government is embracing affordable Chinese electric vehicles, which remain largely prohibited in the U.S. market.

Through a newly negotiated trade agreement, Canada has transitioned from a prohibitive 100 percent tariff on Chinese-manufactured cars to a more welcoming policy. This includes an import cap of 49,000 vehicles, accompanied by a modest 6.1 percent duty.

The previous tariff structure essentially shut out brands like BYD—recently crowned the world’s largest manufacturer of EVs, surpassing Tesla—as well as Chery and Great Wall. Now, under the revised system, Chinese vehicles could represent approximately 3 percent of Canada’s annual car sales.

Chinese EVs Move Closer as the US Stands Alone 

This development positions the U.S. as the sole major automotive market where Chinese cars cannot be easily sold, posing a potential challenge. Ford CEO Jim Farley has even described the proximity of these affordable electric vehicles just across the border as an “existential threat.”

The Canadian initiative comes as a response to American automakers reducing their Canadian operations, a trend set in motion by Trump’s tariffs on aluminum, automobiles, and automotive parts imposed last year.

General Motors canceled plans to build its BrightDrop electric vans there, and Stellantis shifted Jeep Compass production from Ontario to Illinois after the tariffs took effect. 

Canadian Prime Minister Mark Carney has framed the China deal as a way to push back against US influence. 

‘American hegemony, in particular, helped provide public goods, open sea lanes, a stable financial system, collective security and support for frameworks for resolving disputes,’ Carney said at the World Economic Forum in Davos. 

‘This bargain no longer works.’ 

Canada Denies Plans for Full Free-Trade Deal With China 

Carney later stressed that Canada has ‘no plans’ to pursue a full free-trade agreement with China – after Trump warned he would slap a 100 percent tariff on Canadian exports if Ottawa struck a broader deal with Beijing. 

Still, US automakers are alarmed. 

GM chief executive Mary Barra said on Tuesday that Canada’s deal to allow tens of thousands of inexpensive Chinese electric vehicles into the country is a risk to North American auto manufacturing. 

‘I can’t explain why the decision was made in Canada,’ Barra said on Tuesday. ‘It becomes a very slippery slope.’  

The government hopes this move will attract Chinese companies to invest and partner in Canada.

By the end of the decade, at least half of those imported EVs would have to cost about $26,000 or less, and all vehicles would still need to meet Canada’s safety standards. 

Deeply Integrated US–Canada Auto Industry Under Pressure 

The US and Canada share a tightly connected auto industry, with parts and cars crossing the border easily under long-standing trade deals. 

Canada is also a big market for Detroit automakers. In 2025, Ford, GM and Stellantis sold more than 700,000 vehicles there. 

Because Canada’s safety and emissions rules closely match US standards, cars approved in Canada can be brought into the US with little trouble.

That system has been strained over the past year as US tariffs hit Canadian-made vehicles and parts, leading automakers to cut back. 

GM stopped producing its electric vans at a plant in Ontario and is reducing shifts at a pickup factory there. Stellantis also scrapped plans to build the electric Jeep Compass in Ontario, moving production to Illinois.

Meanwhile, Chinese automakers have gained ground worldwide but are largely shut out of the US market because of very high federal tariffs on Chinese-made cars.

Trump threatens Canada with one hundred per cent tariffs in deal with China 

President Donald Trump has warned Canada it would be ‘eaten alive’ if it strikes a deal with China, threatening 100 per cent tariffs on all Canadian goods entering the US.

On Saturday, Trump launched a sharp warning on Truth Social to Canada and Prime Minister Mark Carney over plans to make the country a ‘Drop Off Port’ for Chinese imports into the United States, saying they are ‘sorely mistaken.’

‘China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric and general way of life,’ the president wrote.

‘If Canada makes a deal with China, it will immediately be hit with a 100 percent Tariff against all Canadian goods and products coming into the USA,’ he added.

Trump’s latest threat comes days after Carney’s speech to global leaders at Davos, Switzerland, where he warned that the post–World War II ‘rules-based order’ led by the US and its allies is ‘fading.’

‘Every day we’re reminded that we live in an era of great-power rivalry. That the rules-based order is fading. That the strong can do what they can, and the weak must suffer what they must,’ the Canadian Prime Minister said.

Trump has previously talked about making Canada the 51st state and posted this week an altered image of a map of the US that included Canada, Greenland, Venezuela and Cuba as part of its territory.

The president said at Davos that Canada gets many ‘freebies’ from the US and ‘should be grateful,’ but added that Carney’s speech showed he ‘wasn’t so grateful.’

The Canadian Prime Minister condemned coercion by great powers against smaller nations during his 15-minute speech – without once mentioning Trump by name.

Carney told Davos attendees that smaller powers should build a ‘dense web of connections’ through multilateral cooperation, offering a counterbalance to Trump’s Greenland strategy.

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