China-Canada Tariff Relief: Carney and Xi Strike Historic Deal
China and Canada reset trade ties with tariff relief, cutting canola and EV levies—a historic deal boosting exports, investment, and economic stability.
Chinese leader Xi Jinping and Canadian Prime Minister Mark Carney have announced tariff reductions, signaling a new beginning in relations between the two countries following a key meeting in Beijing.
Carney told reporters that China is expected to reduce tariffs on Canadian canola oil from 85% to 15% by March 1, while Ottawa has agreed to impose the most-favored-nation rate of 6.1% on Chinese electric vehicles.
The deal is a major breakthrough after years of strained relations and tit-for-tat tariffs. Xi praised the "turnaround" in relations, but it is also a victory for Carney, who is the first Canadian leader to visit China in nearly a decade.
He has been trying to diversify Canadian trade away from the United States, his country's largest trading partner, due to the uncertainty created by President Trump's frequently changing tariffs.
The deal could also increase Chinese investment in Canada, right on the doorstep of the United States.
Carney himself hinted that this is a consequence of Trump's tariffs, which have now pushed a key US ally closer to its biggest rival.
He told reporters that Canada's relationship with China has been more "predictable" in recent months and that he found his discussions with Beijing "realistic and respectful."
He also made it clear that Ottawa does not agree with Beijing on everything, and that in his discussions with Xi, he laid out Canada's "red lines," including concerns about human rights, election interference, and the need for "safeguards."
When asked about China's human rights record, he said, "We take the world as it is – not as we would like it to be." Experts believe that Carney's trip could set an example for other countries around the world that are struggling with Washington's tariffs.
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In contrast, Xi is trying to demonstrate that China is a stable global partner and is emphasizing more pragmatic relationships – "mutually beneficial" for all, in Beijing's words.
And it seems to be working. Both the South Korean president and the Irish prime minister have visited Beijing in recent weeks. The British prime minister is expected to visit soon, as is the German chancellor. Carney said that "the world has changed a great deal" and how Canada positions itself "will shape our future for decades to come," he added.
At the start of his three-day trip, he had said that the Canada-China partnership prepares both countries for a "new world order." Later, he said that the multilateral system has been "weakened, to put it mildly, or undermined."
On Friday, as Chinese and Canadian delegations sat in the Great Hall of the People, Xi said: "The healthy and stable development of China-Canada relations is beneficial to world peace, stability, development and prosperity."
Trade shifts
Tariffs have been a major point of contention between the two sides.
In 2024, Canada imposed a 100% tariff on Chinese electric vehicles following similar US restrictions.
Last year, Beijing retaliated by imposing tariffs on more than $2 billion (£1.5 billion) worth of Canadian agricultural and food products, such as canola seeds and oil. As a result, Chinese imports of Canadian goods fell by 10% in 2025.
In the agreement reached on Friday, Canada will allow only 49,000 Chinese electric vehicles into the Canadian market at a 6.1% tariff rate.
This limit was imposed in response to fears among Canadian automobile manufacturers about the influx of cheaper Chinese EVs. In addition to relief for canola producers, tariffs will also be reduced on Canadian lobster, crab, and peas.
China is Canada's second-largest trading partner, but in terms of volume, it still lags far behind the United States.
Economic ties with China are becoming increasingly important for Carney. Upon arriving in Beijing on Wednesday, he met with senior executives from major Chinese businesses, including an electric vehicle battery manufacturer and an energy giant.
On Thursday, the two countries signed several agreements on energy and trade cooperation.
Colin Robertson, a former Canadian diplomat and vice president of the Canadian Global Affairs Institute, said the visit was "a reset of a relationship" that may be "modest in ambition" but "much more realistic about what we can reasonably achieve."
A Chilly History
The last Canadian PM to visit China was Justin Trudeau, who met with Xi in Beijing in 2017.
That visit preceded a souring of relations in 2018, when Canada, at the behest of the US, arrested Meng Wanzhou, the chief financial officer of Chinese tech company Huawei.
Days later, China detained Canadian citizens Michael Kovrig and Michael Spavor on espionage charges—a move critics considered retaliation for Meng's arrest, which China denied.
Meng and both Michaels were released in 2021.
Ahead of the Carney-Xi meeting, Michael Kovrig wrote on X that the visit shouldn't just be about improving relations, but also about "the proper use of power."
Kovrig described Chinese negotiators as "extremely shrewd, calculating, and always looking for an advantage."
"Therefore, negotiations must be handled with discipline," he wrote, adding that Carney should also raise the issue of Canadians imprisoned in China. According to Canadian media, there are approximately 100 such individuals.
Speaking to reporters, Carney clarified that Ottawa would engage with countries that don't share its values in a "smaller, more targeted" way.
"We're very clear about where we cooperate, where we disagree," he said, adding that the Chinese claim over self-governing Taiwan and the imprisonment of pro-democracy activist Jimmy Lai in Hong Kong were discussed in "general conversations."
He said Canada and China have "different systems," which limits the scope of their cooperation.
"But to have an effective relationship, we have direct conversations. We don't conduct diplomacy with a megaphone."
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