Canada & China Trade Deal: Reshaping Procurement Strategies

Canada and China have formalised an initial trade agreement that could significantly reduce tariffs on electric vehicles (EVs) and agricultural products.

The deal, struck during Canad Prime Minister Mark Carney’s visit to Beijing in February 2024, marks the first visit by a Canadian leader since June 2017.

For procurement and supply chain professionals, the agreement is indicative of an ongoing reconfiguration of North American logistics networks and sourcing strategies.

The agreement has emerged against a backdrop of increasing volatility in the traditional Canada-US trading corridor.

Following the re-election of US President Donald Trump, officials in Ottawa said they faced on-again-off-again tariffs and threats to the United States-Mexico-Canada Agreement (USMCA) free trade agreement.

While the US remains the largest partner for Canada, the administration is increasingly viewing China as a necessary counterweight.

Economic observers suggest this recalibration is a response to a world where multilateral systems have been, as Mark told reporters in Beijing, "eroded".

By securing direct access to Chinese markets and manufacturing capabilities, Canada aims to insulate its economy from protectionist shifts in Washington.

This creates alternative supply routes that could reshape continental trade flows.

Impact on automotive sourcing

A central pillar of the deal involves a significant rollback of the 100% tariffs on Chinese-made EVs imposed in October 2024.

Under the new terms, Canada will allow an annual quota of 49,000 Chinese electric vehicles to enter the country at a most-favoured-nation tariff rate of just 6.1%, according to government sources.

This quota is projected to rise to 70,000 vehicles within five years. The move is expected to lower prices for consumers and accelerate the green transition in Canada.

Early beneficiaries are likely to include Tesla, which previously shipped tens of thousands of Chinese-made cars to Canada, alongside Geely-owned brands like Volvo and Polestar.

However, the domestic industry remains wary. The Premier of Ontario, Doug Ford, criticised the move.

It would "hurt our economy and lead to job losses", argued Doug, suggesting the deal invites a flood of cheap made-in-China EVs.

To mitigate these concerns, the deal includes a provision where 50% of the import quota must be priced under US$35,000 by 2030.

This theoretically incentivises the entry of affordable mass-market models from manufacturers like BYD.

For supply chain managers, this could mean establishing new port-of-entry protocols, customs clearance procedures and distribution networks to accommodate increased Asian vehicle imports.

Managing the tariff landscape is just one of the topics which will be explored at Procurement and Supply Chain LIVE events in 2026.

All procurement and supply chain leaders leaders should attend:

• Procurement & Supply Chain LIVE: The Net Zero Summit - QEII Centre, London, March 4-5
  
  
• Procurement & Supply Chain LIVE: The US Summit - Navy Pier, Chicago, April 21-22
  

Co-located with Sustainability LIVE, these events brings together CPOs, CSCO, CSOs, ESG leaders and senior decision-makers at a moment when sustainability, supply chains and commercial performance are increasingly interconnected.

Tickets can be booked online today for The Net Zero Summit and The US Summit. Group discounts available.

Diversifying agricultural export markets

In direct exchange for the EV concessions, Beijing has agreed to slash tariffs on Canadian canola seed from 85% to 15%.

This will provide a vital lifeline to farmers in Western Canada who have been caught in the crossfire of recent trade wars.

In addition to canola seed, China has committed to removing anti-discrimination duties on Canadian lobster, crab and peas until at least the end of the year.

In Manitoba alone, canola supports approximately 35,000 jobs.

However, the deal is not a total victory for the sector as canola oil remains subject to a 100% tariff. This is a detail that industry leaders say requires further negotiation.

Nevertheless, the reduction in seed duties is seen as enormous progress for growers.

For logistics providers, this could mean resumed bulk cargo shipments through Pacific coast terminals and renewed demand for grain handling infrastructure.

Managing geopolitical supply risks

The diplomatic atmosphere in Beijing was described as realistic and respectful. Mark was careful to acknowledge that significant red lines remain regarding human rights and foreign interference.

"We take the world as it is – not as we wish it to be" stated Mark when questioned on the human rights record of China.

This approach was echoed by Chinese President Xi Jinping.

"The healthy and stable development of China-Canada relations is conducive to world peace, stability, development and prosperity" noted Xi.

While Washington has labelled the deal problematic, according to US State Department officials, the Canadian government appears committed to this new approach.

The administration is prioritising economic predictability and supply chain resilience.

For supply chain executives, the agreement may prompt a more careful assessment of cross-border regulations, compliance requirements and an assessment of the geopolitical risks inherent in diversifying away from traditional North American supply routes.