Lawrence L. Herman

January 29, 2026

Donald Trump has threatened Canada with 100%, across-the-board tariffs because Canada has agreed to allow in 49,000 Chinese EVs at reduced tariffs in return for China removing duties on canola and other Canadian agrifood products.

This latest eruption is, at worst, another example of Trump’s erratic trade policy and, at least, as Prime Minister Mark Carney has said, pre-bargaining bluster ahead of the CUSMA review.

For the record, nothing in this deal on Chinese EVs contravenes any agreement we have with the Americans. While the CUSMA provides for advance information if one of the parties seeks to negotiate a free trade agreement with China, simply adjusting some tariffs, much like Trump himself has done with China many times, is not — by any stretch — a free trade negotiation.

What this latest Trump threat reveals, however, is the likely atmosphere in the impending review of the CUSMA.

Whether the agreement itself survives the process is uncertain, but whatever happens, it is difficult to imagine Trump reducing his 25% duty on Canadian auto imports. With that being the reality, the concerns of the Canadian auto sector over Chinese EV imports are understandable, every imported Chinese EV sale meaning one less sale of a Canadian-made vehicle. That means Canadian jobs.

Something to remember, however, is that before Canada imposed 100% duties on Chinese EVs in 2024 (to match what had been done by the Biden administration), the duty on these imports was only 6.2 percent, a most-favoured-nation (MFN) rate that had been in place for decades.

Assuming for a moment that these autos were exported at non-dumped and un-subsidized prices (a pretty large assumption, as will be discussed), China would have been able to ship an unlimited number of these vehicles to Canada at that pre-exiting tariff rate.

Appreciating the industry’s concerns over return to this low duty on even a small volume of Chinese EVs, at the end of the day it will be the Canadian consumer who will have the final say.

While quality and price will be critical of course, much will also depend on whether these vehicles can be easily charged and cost-effectively serviced across the country. So, low duties on these 49,000 imports is only part of the story.

The Carney government needs to make it clear that it cannot and will not limit or curtail these long-established rights for Canadian producers, in full accord with the rules of the World Trade Organization.

There is another factor, as alluded to above. If these vehicles are unfairly priced and take away sales or force price reductions on Canadian auto makers, Canadian trade law gives the companies and their unions the right to seek import relief through the application of anti-dumping and countervailing (AD/CV) duties, levelling the playing field by removing any unfair price advantage from Chinese government subsidies or from below-cost, predatory export practices.

In fact, Canadian companies have been remarkably successful over many years in using these laws to combat a variety of unfairly priced Chinese imports, to the point where today almost two-thirds of all of Canada’s AD/CV duty orders are against goods from China. Most orders cover industrial products but there are those against Chinese consumer product exports as well.

These can be used as precedents for a complaint in the EV sector. Nothing in this recent agreement with China prevents these remedies being invoked. The Carney government needs to make it clear that it cannot and will not limit or curtail these long-established rights for Canadian producers, in full accord with the rules of the World Trade Organization.

Of course, getting these orders is not a slam-dunk for Canadian parties. The process is complicated and costly and building a case for trade remedy action requires careful preparation, the filing of vast amounts of supporting evidence and spending thousands, if not millions, of dollars on lawyers and other experts to convince Canadian trade agencies that import relief is warranted.

Some experts have said that these kinds of private law remedies, even if sanctioned under the WTO Agreement, are not the best way of curtailing Chinese export subsidization practices. That may be right, but the reality is that these laws are going to remain part of Canada’s trade architecture for the long term.

While it may be conjecture, if a complaint was filed at some point against Chinese EVs, given what is known about that country’s export practices, Chinese auto makers would be forced to prove that their exports follow applicable trade rules and are fairly priced.

The result is that it is far from open season on the Canadian EV market.

Together with convincing Canadian consumers that their cars are worth buying for all the reasons mentioned, Chinese exporters — and their importers — will have to ensure that their autos are neither dumped nor subsidized or they will come under the powerful hammer of Canada’s trade relief mechanisms.

While the system is costly and complex, it has been remarkably successful over time and that should give a degree of solace to the Canadian auto industry and their workers.

Policy contributor Lawrence Herman is an international lawyer with Herman & Associates, a senior fellow at the C.D. Howe Institute in Toronto and a member of the Expert Group on Canada-U.S. Relations. He is a former foreign service officer, having served in Canada’s Permanent Mission to the United Nations and the GATT.