Image: Tesla
Canada’s auto market could be on the verge of its biggest shakeup in years. Prime Minister Mark Carney has confirmed a major reset in Canada–China trade relations, slashing tariffs on Chinese-made electric vehicles and reopening the door to imports that were effectively blocked just a year ago. The move not only clears the way for tens of thousands of lower-cost EVs, but could also have a surprising side effect: cheaper Teslas imported directly from China.
Under the new agreement, Canada will allow up to 49,000 Chinese electric vehicles per year to enter the country at a much lower 6.1% tariff, replacing the punitive 100% duty imposed under former prime minister Justin Trudeau in 2024. According to reporting on the deal, that quota is expected to rise gradually, reaching roughly 70,000 vehicles annually within five years. In exchange, China has agreed to dramatically lower tariffs on Canadian canola and other agri-food exports, restoring access to a key market for Canadian farmers.
As detailed by iPhone in Canada, the federal government is framing the policy shift as a win for affordability and climate goals, with officials expecting that at least half of the imported vehicles will be priced under $35,000 CAD within five years. Ontario Premier Doug Ford, however, has warned the move could undercut Canada’s domestic automotive sector, arguing it opens the floodgates to low-cost competition without firm commitments on local investment or manufacturing.
Beyond brands like BYD, XPeng, Nio, Xiaomi, and Zeekr, the deal also has major implications for Tesla. Because the new 6.1% tariff applies to any EV built in China, Tesla could potentially use part of the quota to import vehicles from Gigafactory Shanghai. That could significantly lower prices for Canadian buyers, especially for the Model 3.
Right now, Tesla’s Canadian lineup is shaped largely by tariffs and logistics. Model Ys sold in the country are imported from Gigafactory Berlin in Europe, while Model 3s have become more expensive than the SUV after being sourced from Fremont and Shanghai at higher tariffs. Opening the door to Shanghai-built Teslas at lower trade costs could rebalance that equation, giving Tesla flexibility to offer more competitive pricing if it chooses to allocate quota space.
Politically, the deal marks a sharp divergence from U.S. policy, which continues to impose steep penalties on Chinese EVs. Still, Carney has defended the decision as pragmatic, arguing Canada needs access to global supply chains and innovative partners to build a competitive EV market at home.
For Canadian consumers, the bottom line is simple: more choice, and potentially much cheaper electric cars. Whether that comes at the expense of local jobs or strengthens Canada’s long-term EV ecosystem is a debate that’s only just beginning.
