On January 16, 2026, China and Canada reached significant consensus on deepening economic and trade cooperation, marking a positive shift from unilateral restrictions to bilateral agreements . The landmark arrangements address longstanding trade frictions and create new opportunities for key industries in both countries.
Key Agreement Terms
- Electric Vehicle (EV) Tariff Adjustment: Canada will revise its previous EV tariff policy (implemented in alignment with U.S. measures) by introducing a tariff-rate quota system for Chinese EV imports. Under the new rules, up to 49,000 Chinese EVs will be allowed annual access to Canada at a most-favored-nation (MFN) tariff rate of 6.1%—a substantial reduction from the prior 100% punitive duty . The quota volume reflects pre-2024 trade levels (accounting for less than 3% of Canada’s total auto market) and will increase gradually year-over-year .
- Agricultural & Aquatic Products Measures: In response, China will adjust anti-dumping measures on Canadian canola seeds and lift anti-discriminatory tariffs on selected Canadian agricultural and aquatic products (including canola meal, peas, lobsters, and crabs) . Starting March 1, 2026, Canada’s canola seed exports to China will enjoy a reduced tariff rate of approximately 15%, down from the previous 84-85% . These adjustments are expected to generate nearly CAD 3 billion in additional orders for Canadian exporters .
U.S. Response & Canadian Reactions
The bilateral agreement has drawn attention from the United States, with former U.S. President Donald Trump expressing strong opposition. On January 24, Trump issued a social media statement threatening to impose a 100% tariff on all Canadian imports if Canada proceeds with the China trade deal . He claimed the agreement would “allow China to swallow Canada whole” and undermine Canadian businesses, social structures, and lifestyles .
In response to the threat, the Canadian government clarified its position and made commitments to address U.S. concerns :
- Official Explanation: Canada emphasized that the China cooperation is not intended to form a comprehensive Free Trade Agreement (FTA). Instead, it aims to “rectify issues arising in recent years” and protect the interests of specific industries .
- USMCA Compliance Commitment: Canada reaffirmed its adherence to the United States-Mexico-Canada Agreement (USMCA), particularly Article 32.10 which restricts USMCA signatories from entering FTAs with non-market economies without prior notification and review . This commitment addresses a key U.S. concern ahead of the 2026 USMCA renegotiations .
To mitigate external uncertainties, Canada has launched a “Buy Local” campaign, encouraging domestic consumption while focusing on controllable economic strategies . Industry analysts note that Canada’s quota-based EV policy—designed to prevent Chinese EVs from diverting to the U.S. market—may alleviate U.S. concerns and enable the continued implementation of the China-Canada agreement .
Background & Future Outlook
The January 2026 agreement follows Canadian Prime Minister Justin Trudeau’s official visit to China (the first by a Canadian prime minister in eight years) and the signing of the “China-Canada Economic and Trade Cooperation Roadmap” . This roadmap establishes an upgraded ministerial-level economic and trade joint committee and outlines 28 cooperation initiatives across 8 key areas, including green trade, e-commerce, and advanced manufacturing .
As the 2026 USMCA renegotiations approach, U.S. officials have indicated that the China-Canada deal may influence upcoming talks, with Trump’s tariff threat potentially serving as a negotiating tactic to secure U.S. interests . For Canada, the agreement reflects a strategic effort to diversify trade partnerships amid evolving geopolitical dynamics, while balancing its longstanding economic ties with the United States .
Both China and Canada have committed to finalizing implementation details, establishing timelines, and accelerating domestic procedures to ensure the agreement’s effective execution . The developments underscore the importance of bilateral dialogue in resolving trade disputes and fostering mutually beneficial cooperation.
