Canada and China have reached an initial trade deal reducing tariffs on Chinese electric vehicles (EVs) and Canadian farm exports, reversing retaliatory measures introduced in 2024, reported Reuters.

Canada will allow up to 49,000 Chinese electric vehicles annually at a most-favoured-nation tariff rate of 6.1%.

It replaces the 100% duty imposed under former prime minister Justin Trudeau in 2024 following similar US actions.

China exported 41,678 EVs to Canada in 2023.

In return, Beijing has agreed to lower tariffs on several Canadian agri-food products.

China had imposed duties in March on more than $2.6bn worth of Canadian agricultural and food exports, including canola oil and meal, and later extended additional tariffs to canola seed in August in retaliation for Canada’s EV levies.

These measures were linked to a 10.4% decline in China’s imports of Canadian goods in 2025.

Canadian Prime Minister Mark Carney said the EV quota and tariff adjustment form part of the broader agreement aimed at easing bilateral trade barriers.

In a separate statement, electric vehicle manufacturer Lotus Technology said Canada’s revised EV tariff framework would support its expansion plans in the country.

Lotus CEO Qingfeng Feng said: “Canada has always been a strategically vital market within Lotus’ global footprint, where auto consumers possess a high appreciation for performance and driving pleasure. We extend our warm welcome to the new, optimised tariff policy, which creates a more open and fair market environment for international auto brands.”

Separately reported by Reuters, officials from the Trump administration warned that vehicles entering Canada under the new arrangement would be blocked from the US market.

US Transportation Secretary Sean Duffy said at an event at a Ford factory in Ohio: "I think they'll look back at this decision and surely regret it to bring Chinese cars into their market”.