Employees work at a BYD factory in Huai'an, China, in August, 2024. The new trade deal opens up some of the Canadian auto market to Chinese EVs in exchange for reduced tariff barriers on several products such as canola.STR/AFP/Getty Images
Whatever you think of the wisdom of Mark Carney’s trade deal with China, it’s not a big vote of confidence for the future of Canada’s auto industry. At least, not the auto industry we have known.
It was a move to jump-start trade with the world’s second-largest economy, opening the big Chinese market to Canadian canola, peas and seafood.
Yet, the concession that Mr. Carney made – accepting imports of 49,000 Chinese vehicles a year with very low tariffs – is a far bigger signal than he admitted.
It suggests the Prime Minister is no longer betting big on the survival of the cross-border auto trade we have known since the 1960s.
Opinion: How Canada’s auto sector can survive its terrible, no-good, very bad year
Mr. Carney’s federal government is now shopping for new investors in Canada‘s auto sector from South Korea and China. The Globe and Mail reported last week that the government plans to give foreign automakers that build cars in Canada preferential access to the Canadian market.
But that means searching for companies willing to build plants that would primarily sell to the relatively small Canadian market.
Ontario Premier Doug Ford doesn’t like that idea. He called Mr. Carney’s deal a “massive threat.”
Clearly, the Premier still hopes to save the old, threatened model that sees Ontario plants assemble vehicles to be sold in both the United States and Canada. On Monday, he told reporters that China will “never, ever” open a plant in Canada because it won’t sell enough vehicles in Canada, and the U.S. wouldn’t accept them.
The president of the Automotive Parts Manufacturers’ Association, Flavio Volpe, said Mr. Carney’s deal wasn’t good for the auto industry, but he recognized the Prime Minister has to balance other interests. He noted that last year, Mr. Carney committed $5-billion to a “strategic response fund” aimed in large part at helping the industry.
Still, the signal no longer seems to be the all-out commitment to save the auto sector that was central to Liberal policy and politics under Justin Trudeau.
“He’s not as bullish on autos as his predecessor, that’s for sure,” Mr. Volpe said.
Opinion: Even with Carney’s new deal, don’t expect to buy a cheap Chinese EV any time soon
Perhaps that’s a pragmatic calculation. Perhaps the former investment banker has looked at the numbers and doesn’t see great prospects. The deal Mr. Carney made with China suggests that he’s not totally convinced in its future, anyway.
The deal opened up a piece of the Canadian auto market to Chinese electric vehicles – which were effectively barred since Ottawa hit them with a 100-per-cent tariff in October, 2024 – in exchange for China reducing tariff barriers on several Canadian products, notably canola.
That’s a concession in Canada’s hurting industrial economy for a gain in agri-food, mostly commodities. Given Beijing’s on-and-off use of tariffs for trade leverage and political pressure, that could turn out to be temporary access.
In Beijing, Mr. Carney played down the decision to allow 49,000 Chinese EVs into Canada as a trade-off involving a small piece of the Canadian auto market, which, he said, would cap Chinese imports at the same level as they were shipping in 2023.
But it doesn’t mean going back to the way it was.
For starters, Canada never actually imported more than 41,000 Chinese EVs in any calendar year, according to Statistics Canada figures, although there was a surge in 2024 before the tariffs were imposed in October.
Back then, most of the Chinese EV imports were pricey made-in-Shanghai Teslas. This time the door will be opened to low-cost EVs produced by Chinese automakers such as BYD, Geely and Chery. They will presumably open dealerships in Canada, possibly supplementing their inventory with cars they make in other countries such as Brazil.
It’s worth remembering that Canada didn’t just impose the hefty tariffs because the U.S. asked us to. It was to protect the Canadian market, and join in protecting the North American market, from the dumping of low-cost Chinese EVs.
At the time, Canada was offering huge subsidies for EV battery-makers in a bid to develop an EV industry here. China had built a massive industry with a state-directed and state-subsidized strategy that produced far more cars than its domestic market could absorb. It was cutting prices to gain global market share.
Now Mr. Carney has opened a door in that wall. He tied it to an uncertain hope that Chinese companies will build plants here. For the auto industry we have now, that’s not a signal of faith in the future.