Canada and China Hit Each Other With 100% Tariffs on EVs and Agriculture, Escalating Trade Dispute

By
Reynold Cheung
4 min read

Canada vs. China: The Rising Trade War and Its Implications for Global Markets

Escalating Tariffs: What Happened?

The economic standoff between Canada and China took a sharp turn as both countries announced high-stakes tariff measures targeting each other’s key industries.

  • Canada’s Move: On October 1, 2024, the Canadian government implemented a 100% tariff on Chinese electric vehicles , followed by a 25% tariff on Chinese steel and aluminum products starting October 22, 2024. This decision aligns with broader Western protectionist trends aimed at limiting China’s economic influence in strategic sectors.

  • China’s Countermeasure: In response, China’s State Council Tariff Commission declared a 100% tariff on Canadian canola oil, canola meal, and peas, alongside a 25% tariff on Canadian seafood and pork, effective March 20, 2025. Given Canada’s heavy reliance on China as a key agricultural export market, this move is set to disrupt supply chains and impact Canadian farmers significantly.

Key Industries Impacted

1. Electric Vehicles and the Auto Industry

While Canada is not a primary market for Chinese EVs, the 100% tariff effectively eliminates any competitive advantage that Chinese automakers had. The measure aligns with North America’s broader strategy of containing China’s dominance in green technology.

Industry Impact:
  • Chinese Automakers: Companies like BYD and NIO will face immediate barriers to entry, while other EV players may use Southeast Asian assembly plants to circumvent tariffs.
  • Canadian Consumers: Higher vehicle costs and fewer affordable EV options.
  • North American EV Market: The tariff shields domestic and US-based automakers from cheaper Chinese alternatives but may slow the adoption of affordable EVs.

2. Steel and Aluminum Trade

China’s retaliation against Canadian metal tariffs is relatively mild. China is not heavily dependent on Canadian steel or aluminum, making the impact on its domestic supply chain limited. However, for Canada, which exports a portion of its metal to China, the additional costs could strain its commodity markets.

Industry Impact:
  • Canadian Metal Industry: Minor export disruptions but manageable given US and European markets as alternatives.
  • China’s Manufacturing Sector: Limited impact due to diversified supply sources.

3. Agriculture and Food Security

China’s 100% tariff on canola oil, canola meal, and peas is strategically targeted. Canada is the world’s largest exporter of canola, and China has historically been a major buyer. This measure is expected to hurt Canadian farmers, with some estimates predicting an annual industry loss exceeding CAD 1 billion.

Industry Impact:
  • Canadian Farmers: Immediate revenue losses and excess supply with fewer alternative buyers.
  • China’s Domestic Market: Increased emphasis on local oilseed production and diversification of imports from other countries such as Russia and Brazil.
  • Global Grain Markets: Potential price volatility as demand shifts from Canadian suppliers to alternative producers.

4. Seafood and Pork Trade

Canada is a notable exporter of seafood and pork to China. A 25% tariff on these products will make Canadian exports significantly less competitive, redirecting trade flows to other Asian markets or forcing price reductions to retain demand.

Industry Impact:
  • Canadian Meat and Seafood Exporters: Lower profitability, increased domestic supply, and potential trade rerouting to Japan and South Korea.
  • China’s Domestic Market: Minor impact due to existing diversified pork and seafood imports.

Geopolitical Context and Strategic Implications

1. Canada’s Position in the U.S.-China Trade Tensions

Canada’s decision follows broader Western economic policies aimed at reducing reliance on Chinese imports.

  • The timing aligns with U.S. pressure on allies like Mexico and Canada to increase tariffs on Chinese goods, mirroring Washington’s hardline stance on China’s trade policies.
  • This move echoes Mexico’s recent tariff increases on Chinese imports, reportedly in exchange for U.S. trade concessions.

2. China’s Long-Term Strategy

China’s response is calculated and restrained:

  • The focus on agricultural tariffs suggests a desire to exert pressure on Canadian farmers while avoiding escalation in sectors that might disrupt China’s broader economic stability.
  • China’s internal policy shift towards food security is becoming evident, with self-sufficiency in staple crops and oilseeds gaining priority.
  • Rather than escalating the dispute, China is leveraging its market size to push Canada into reconsidering its stance.

Investor Takeaways and Market Outlook

Short-Term Impacts

  • Increased market volatility in affected sectors, particularly in agriculture, metals, and EVs.
  • Investment shifts as businesses explore alternative supply chains and new trade routes.
  • Commodity price adjustments, particularly in canola and metal markets.

Long-Term Implications

  • Regionalization of Supply Chains: The trade conflict is accelerating the shift towards localized production and alternative trade alliances.
  • Investment Opportunities in Domestic AgTech: China’s push for self-sufficiency in agricultural products creates new growth areas in domestic agritech, precision farming, and food security solutions.
  • Reshaping of Global Trade Partnerships: Canada may look to expand trade with alternative markets such as Southeast Asia, the EU, and Latin America to counterbalance reliance on China.

What’s Next?

While Canada’s agriculture and commodity sectors will bear the brunt of China’s retaliation, the broader market response remains measured. Investors should watch for:

  • Further escalation in tariffs, especially in critical sectors like rare earths, semiconductors, or energy.
  • Canada’s diplomatic response—whether it doubles down or seeks de-escalation through negotiations.
  • China’s alternative sourcing strategies, which could permanently alter global agricultural supply chains.

The Canada-China tariff battle underscores the larger global shift toward protectionism. While the immediate economic impacts are contained, this development signals a more fragmented global trade environment, where regional alliances and strategic autonomy will define future economic policies. For businesses and investors, risk mitigation through diversification and strategic positioning will be crucial in navigating this evolving landscape.

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