Why Canada Is Allowing Chinese EVs

American tariffs have dealt a blow to Canadian auto manufacturing, and the Canadian government is striking deals with other countries. Canada is dropping the 100% duty on Chinese EVs, and is allowing about 50, 000 vehicles into the country at a tariff rate of 6.1%. This is a dramatic shift from just a few years ago. Up until 2024, Canada had accepted Chinese vehicles of any kind at that same 6.1% tariff rate. But in 2024, following in the footsteps of the US, it raised the duty on Chinese EVs to effectively 106%. In exchange for reducing the duty, China said it would reduce its tariffs on Canadian canola oil. But in addition, the deal aims to create joint ventures between China and Canada that will generate jobs for Canadian workers and help build out the country's EV supply chain. Canada's auto manufacturing sector has been shrinking for about the last quarter century, from around 3 million units in 2000 to 1.3 million in 2025. The introduction of the US tariffs has accelerated the decline. China is not the only country Canada is striking deals with. It also signed a memorandum of understanding with Korea on clean vehicle manufacturing. In early February, the Canadian government released a new automotive strategy for the country. It restored the $5,000 federal credit for electric vehicles, which had run out of money in 2025. The government also plans to offer tax credits for manufacturers in the country. But experts say that if Canada's relationship with the US doesn't improve, it's unclear if international automakers are going to want to invest in a country when it doesn't have access to the US market. Domestic car sales in Canada are only 1.8 to 2 million units a year. New car sales in the US are about eight times that. Canada exports around 90% of the vehicles it makes overwhelmingly to the US, and imports make up about the same percentage of vehicles sold in the country. Under the agreement, 49,000 Chinese EVs are permitted in Canada. Initially, that number could rise to 70,000 in 5 years. Even if one Chinese automaker were to totally monopolize that, it still wouldn't be enough to justify the construction of a typical factory. The high fixed costs of manufacturing require that a plant make a minimum of 200,000 to 250,000 vehicles to be profitable. Given that the Canadian government is likely to allocate shares of the total 49,000 to different automakers,