After several years of escalating trade tensions, Canada and China have entered a new phase of tariff negotiation, culminating in a January 2026 preliminary agreement that marks the most significant reset in bilateral economic relations in nearly a decade. For businesses operating in Canada, particularly those in agriculture, transportation and manufacturing, these developments trigger both immediate relief and new strategic considerations. The following provides insight into the current landscape of the trade relationship between Canada and China, what has changed and how Canadian businesses should be preparing for the next step.
How we got here
Since 2024, Canada and China have exchanged successive rounds of tariffs, beginning with Canada’s 100% tariff on Chinese electric vehicles (EVs) and 25% tariffs on steel and aluminum. China responded with 100% duties on Canadian canola oil, canola meal and peas, along with 25% tariffs on pork and certain seafood products. These retaliatory measures created a significant disruption to Canadian agricultural exports, leaving many producers exposed to market volatility. More specifics on the state of these tariffs in 2024 and 2025 can be found in our previous insight, No relief in sight: Canada-China tariffs, retaliation and the WTO Dispute Panel.
Key terms of the new tariff deal
Electric vehicle tariff reductions
Canada will now permit imports of up to 49,000 Chinese-made EVs annually under the standard 6.1% most-favoured-nation tariff, reversing the 100% tariff introduced in 2024. By 2030, 50% of these imports must be priced below $35,000, a measure aimed at stimulating affordable EV availability in Canada. Prime Minister Carney has indicated the EV quota may drive considerable Chinese joint-venture investment in Canada’s auto sector, including supply chain integration and clean-energy storage technologies.
Major reduction in Chinese agricultural tariffs
In exchange, Canada expects China will drop its retaliatory tariffs on key Canadian agricultural exports, including:
- Canola seed duties reduced from 84% to a combined rate of approximately 15% by March 1, 2026
- Canola meal, lobster, crab and peas will be free from anti-discrimination tariffs from March 1, 2026, to the end of 2026
Steel and aluminum remission measures
Canada will extend its existing tariff-remission program for Chinese steel and aluminum products that remain in short supply domestically through to the end of 2026. The extension covers 66 product specific lines and 49 company-specific lines, ensuring ongoing duty relief where Canadian alternatives are unavailable. Canada will also add seven steel, two aluminum and four steel-derivative products to the remission schedule. These expanded measures take effect March 1, 2026, with retroactive relief to January 1, 2026.
Implications for Canadian businesses
Agri-food exporters
The tariff reduction is expected to restore access to a market valued at approximately $4 billion per year in canola seed alone. Practical implications on canola producers in Canada include:
- Producers may regain a competitive advantage which was lost during the 2024–2025 tariff escalation period
- Exporters should revisit long-term sales contracts, supply commitments and hedging strategies
- Producers and exporters may want to consider re-entering or expanding in the Chinese market, after conducting a geopolitical risk assessment
Auto sector and EV supply chain
Canadian businesses operating in the emerging battery-materials and hydrogen sectors may benefit from increased demand for critical minerals. These businesses may also see new opportunities through joint ventures with Chinese EV and battery manufacturers, along with greater investment in charging infrastructure and grid-scale storage.
Steel and aluminum supply chains
For manufacturers reliant on specialized steel, aluminum and derivative products, the continued remissions provide short-term price stability and predictable access to critical inputs. Extending and expanding this relief helps prevent cost spikes and production delays, particularly in construction, transportation equipment and clean-technology manufacturing.
Legal considerations
The new Canada-China tariff arrangement introduces a range of legal considerations that Canadian businesses will need to navigate carefully. Organizations exploring opportunities created by this agreement should begin reassessing their international trade compliance framework, as the combination of reduced tariffs and shifting regulatory dynamics may require updated import strategies, renewed supply contracts and enhanced customs documentation procedures. Businesses pursuing new partnerships with Chinese entities must also consider the implications of the Investment Canada Act (Canada). These transactions often require sophisticated structuring to balance the commercial advantages of foreign capital with governance safeguards, intellectual property protections and national-security compliance.
In addition, the growing focus on clean-technology supply chains and EV production places environmental, social and governance (ESG) considerations at the forefront of commercial planning. As organizations integrate Chinese components, technology or investment, these organizations may face heightened obligations in areas such as emissions reporting, ethical sourcing of materials and supply-chain transparency. This new Canada-China tariff agreement has the potential to position Canadian organizations to scale EV adoption and participate more fully in global clean-energy value chains. However, doing so responsibly will require careful contract drafting, risk allocation and regulatory due diligence.
The Canada-China tariff deal represents both an opportunity and a challenge. For Canadian businesses, particularly those operating in the agri-food, clean technology and supply-chain logistics sectors, the agreement may unlock new growth opportunities. However, this new tariff update requires careful strategic planning and legal foresight.
If your organization is evaluating how these developments affect your sector or cross-border strategy, the MLT Aikins corporate and international trade teams will be happy to help your organizations chart the best path forward. These most recent changes continue to reflect a changing and dynamic trade environment. Please see the resources on our Legal Beacon page for assistance in managing the legal risks associated with international trade and the associated contracts.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
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