Canada-China Trade: Reducing Tariffs on Seafood & Canola

Canada's recent trade agreement with China could signal a broader shift in how North American businesses approach supply chain diversification and market access strategy.

The preliminary deal, negotiated during Prime Minister Mark Carney's February 2024 visit to Beijing, emerged from the first bilateral meeting between Canadian and Chinese leaders since June 2017.

The agreement centres on tariff reductions affecting electric vehicles and agricultural commodities, presenting potential opportunities for businesses navigating an increasingly complex trade environment.

The timing of the agreement reflects growing uncertainty in traditional North American trade relationships.

Following President Donald Trump's re-election, Canadian officials reported facing unpredictable tariff policies and questions around the future of the United States-Mexico-Canada Agreement (USMCA).

While the US continues as Canada's primary trading partner, Ottawa's pivot towards China – the world's second-largest economy – could represent an attempt to build economic resilience.

As Carney noted, multilateral systems have been "eroded".

The strategy could offer Canadian businesses alternative supply routes and market access points, potentially reducing dependence on a single trade corridor.

Canola tariffs slashed

Among the most significant elements of the deal is Beijing's agreement to reduce tariffs on Canadian canola seed from 85% to 15%.

The reduction could provide relief to western Canadian farmers who have faced restricted market access in recent years.

China has also committed to removing anti-discrimination duties on Canadian lobster, crab and peas through the end of the year.

According to industry figures, canola supports approximately 35,000 jobs in Manitoba alone.

However, canola oil remains subject to a 100% tariff, a detail that industry representatives say requires further negotiation.

Despite this limitation, the reduction in seed duties could represent substantial progress for agricultural producers.

For logistics operators, the agreement could mean increased bulk cargo movements through Pacific terminals and heightened demand for grain handling infrastructure.

Electric vehicle quota system introduced

The agreement includes a substantial modification to the 100% tariffs on Chinese-made electric vehicles that were implemented in October 2024.

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

This quota is projected to increase to 70,000 vehicles within five years.

The arrangement could lower consumer prices and support Canada's transition towards electrification.

Tesla, which previously imported tens of thousands of Chinese-manufactured vehicles to Canada, and Geely-owned brands including Volvo and Polestar could benefit from the revised tariff structure.

Domestic industry concerns remain prominent. Ontario Premier Doug Ford criticised the move, arguing it would "hurt our economy and lead to job losses" by inviting "a flood of cheap made-in-China EVs."

To address these concerns, the deal stipulates that 50% of the import quota must be priced under US$35,000 by 2030, theoretically encouraging entry of affordable mass-market models from manufacturers such as BYD.

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

Diplomatic pragmatism shapes approach

The diplomatic environment in Beijing was described as realistic and respectful, though Carney acknowledged that significant differences remain on human rights and foreign interference issues.

"We take the world as it is – not as we wish it to be," he stated when questioned on China's human rights record.

Chinese President Xi Jinping echoed this pragmatic tone, noting: "The healthy and stable development of China-Canada relations is conducive to world peace, stability, development and prosperity."

While US State Department officials have labelled the deal problematic, the Canadian government appears committed to prioritising economic predictability and supply chain resilience.

For executives managing cross-border operations, the agreement could prompt reassessment of regulatory compliance requirements and evaluation of geopolitical risks associated with diversifying beyond traditional North American supply routes.