Canada and China are re-setting ties after leaders Mark Carney and Xi Jinping met in Beijing.
The leaders agreed to lower tariffs on each others products in a move that could boost bi-lateral trade but risks irking the United States.
The main deal dealt with near-term tariff levels and saw both sides dropping tariffs:
- Canada will allow up to 49,000 Chinese electric vehicles into the Canadian market, with the most-favoured-nation tariff rate of 6.1%
- China will lower tariffs on Canadian canola seed to a combined rate of approximately 15% from 85%
- Canadian canola meal, lobsters, crabs, and peas will not be subject to relevant anti-discrimination tariffs
- Canada has set a goal to increase exports to China by 50% by 2030
- Xi Jinping commits to visa-free travel for Canadians
- Canada cites two-way opportunities batteries, solar, wind, and energy storage
As for the auto deal, here is how the Prime Minister's office framed it:
This amount corresponds to volumes in the year prior to recent trade frictions on these imports (2023-2024), representing less than 3% of the Canadian market for new vehicles sold in Canada. It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain. With this agreement, it is also anticipated that, in five years, more than 50% of these vehicles will be affordable EVs with an import price of less than $35,000, creating new lower-cost options for Canadian consumers.
There were two separate releases, the second dealt with the larger strategic picture:
Carney and Xi Jinping agree to deepen strategic ties
Canada reaffirms One China policy during official visit
bilateral trade roadmap signed to resolve economic issues
ministerial energy dialogue launched for clean power and oil
Bank of Canada renews currency swap with China
Carney has made it a political cornerstone to diversify trade away from the United States after the US raised tariffs and talked of annexation. This is a big step in that direction but the lowered China auto tariffs -- even on a limited set of cars -- will irk the domestic auto manufacturing industry and the White House.
The Canadian dollar is unmoved on this deal, which comes as a modest surprise. There has been some talk of a deal but it looked like it wasn't going to happen earlier this week. While the deal itself is good, it adds some fresh risks for the loonie if Trump throws a tantrum.
USD/CAD was last flat on the day at 1.3890.
