Trump's Tariffs Push Canada To Get Cozy With China On EVs

What was unfathomable just a few short years ago has actually happened. After Trump flipped off a plant employee at Ford's Dearborn truck plant this week, he addressed the media about negotiating a replacement to the USMCA (United States-Mexico-Canada Agreement), which he implemented in his first term. During that press conference, Trump said, "We don't need Canada product." With statements like these, Canadians understandably began second-guessing some of their trade agreements. The same week Trump made these statements, and after months of demeaning our trading partners to the North, Canada signed an agreement to reduce tariffs on 50,000 Chinese EVs.

During the waning months of the Biden presidency, the administration slapped Chinese EVs with a 100% tariff. The Canadians followed suit, with their own 100% tariffs on Chinese-made electric vehicles. The reasoning is pretty simple: Flooding the market with inexpensive EVs from China could hurt the domestic car manufacturing economy, which could lead to plant shutdowns and layoffs. Since every direct automotive job also creates seven to ten jobs in related sectors, there's some strong incentive to keep those domestic plants churning out product.

When Trump came to power, he immediately set his sights on tariffs. But not just any tariffs, unpredictable tariffs that one week affect an industry while the next week they do not. Eventually, we settled into a system that some automakers believe helps level the playing field with countries like China, but Trump didn't stop there. Trump has made it clear that he wants Canada to be the 51st state and that the United States needs to control Greenland to protect national security, even though we already have a base there to defend our interests. These statements, unsurprisingly, made the Canadians quite angry at us to the point where many Canadians boycott American goods.

Canadian Prime Minister Mark Carney flew to Beijing this week to talk trade. After the meeting, the Canadians announced that they would be lowering the tariffs on Chinese EVs and that China would reduce its tariffs on canola seed. The tariff reduction on EVs will go from 100% to 6.1% and would affect up to 50,000 imported vehicles every year. That means Chinese EVs will soon be available for sale in Canada. These vehicles aren't made in Canada, which has given some Canadian politicians pause, but they should be cheap. At least half of Chinese EVs sold in Canada by 2030 must cost less than $35,000 Canadian. Based on today's exchange rates, a $25,000 USD vehicle would be around that $35,000 mark. The Nissan Leaf, one of the cheapest new EVs you can purchase today, starts at approximately $45,000 in Canada.

This isn't good news for North American automakers. Mike Murphy, CEO of the American EV Jobs Alliance, doesn't mince words. "When U.S. trade policy becomes chaotic, unpredictable, and destructive, bad outcomes are inevitable," he said in a statement. "President Trump has really bungled the job when it comes to standing up for U.S. auto jobs and North American auto manufacturing." It also wouldn't be surprising if this news causes automakers to rethink their Canadian EV strategy.

For example, Ford has EVs coming that will be built on its new Universal EV Platform. This platform will support inexpensive EVs, including a small pickup truck, and should go on sale sometime in 2027 — that is, if the current timeline holds. It is projected to have a starting price of $30,000 USD (or nearly $42,000 CAD). Using our fuzzy math, that would make the Ford EV $7,000 CAD more expensive than the Chinese imports that'll be hitting the streets. If people aren't willing to pay the price difference for the Ford badge, and are willing to buy a Chinese brand they might not have heard of, it would essentially make Ford's cheap EV dead on arrival in Canada.

While 50,000 cars a year might not seem like a lot, it's worth pointing out that Mazda sold 80,000 vehicles in Canada last year. Tesla, which has been having a bad time as of late, only shifted 20,000 EVs to our friends up north. There are also enough cars to upset the mix of EVs that are sold in Canada, even if that mix is a very small part of the overall pie. But it will give Canadians access to several new brands of automobiles, which are getting better and better while still maintaining a certain level of affordability. Regardless of the concerns people may have about flooding the market with Chinese-made vehicles, cars are getting more expensive, and people are going to need access to an alternative. Canada is still on track to end all gas-powered vehicle sales by 2035, so it will need affordable EVs for every income level can afford.

Trump hasn't made it easy for American auto makers. Murphy places the blame right at his feet. "China is not a U.S. ally, and its state-sponsored automotive conquest strategy is based on flooding foreign markets and deindustrializing geopolitical rivals," he said. "President Trump often says he is on the side of auto workers; unfortunately, his actions show those appear to be China's auto workers."

There are still a bunch of unknowns, but with Chinese EVs now gaining a foothold in North America, it seems like only a matter of time until they reshape the entire automotive industry.