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:
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Carney and Xi Jinping agree to deepen strategic ties
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Canada reaffirms One China policy during official visit
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bilateral trade roadmap signed to resolve economic issues
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ministerial energy dialogue launched for clean power and oil
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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.
This article was written by Adam Button at investinglive.com.