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Canada and China’s recent de-escalation of trade tensions bodes well for some exporters in the Prairies and coastal regions, who have faced export losses stemming from reduced Chinese market access.
China will remove 25% tariffs on Canadian seafood, peas, and canola meal, and sharply reduce tariffs on canola seed from 75.8% to 15% as March 1, 2026.
In exchange, Canada will lower tariffs on imports of Chinese electric vehicles from 100% to 6.1%, allowing imports of up to 49,000 EVs this year. That means Chinese EVs would account for less than 3% of vehicle registrations in Canada the year ending Q3 2025.
The move will provide near-term relief for hard-hit sectors in agriculture, though longer-term uncertainties persist around both the durability of the truce and the competitive implications of Canada’s auto sector.
Chinese tariffs hit canola seed exports—but trade was already diversifying
Canada’s canola exports declined roughly 13% from January to October 2025 compared with the same period in 2024. Farm cash receipts fell 9% over the first three quarters of last year despite record canola production.
Chinese tariffs imposed mid-August had an immediate effect on canola seed exports to China, falling effectively to zero in September and October 20251. They fell 60% from January through October last year compared to 2024.
However, not all the decline in canola product exports reflects weaker shipments to China. Roughly one-third of the overall drop in canola products came from lower exports of canola oil, primarily to U.S. buyers.
There were already signs Canadian exporters were finding alternative markets for canola seed directly impacted by China’s tariffs. Exports of canola seed to countries other than the U.S. and China more than doubled in 2025 to October from a year earlier, helping to partially offset export losses from the Chinese market.
Interestingly, the share of total Canadian canola seed exports to China had already fallen from just under 80% in September 2024 to less than 50% in the months following Canadian tariffs on Chinese EVs and metals—suggesting crop marketers (correctly) were anticipating increased risks that tariffs on canola could follow.
Exports to China for other tariffed goods, including seafood and pork, have also declined materially – by 31% and 19%, respectively, in 2025 up to October from a year earlier. But, export losses for these goods have been offset by stronger exports to other markets.
Western provinces and Nova Scotia bore brunt of impact
China is the largest export market for canola seed from Saskatchewan, Alberta, and Manitoba—together accounting for roughly $4 billion of the $6 billion in total Canadian canola seed exports in 2024.
Chinese tariffs contributed to overall canola seed export declines of 10% in Saskatchewan, 10% in Alberta, and 15% in Manitoba in 2025 up to October, compared with 2024.
Tariffs on seafood products largely affected coastal provinces. Exports to China fell by roughly 30% in Nova Scotia and British Columbia in 2025 up to October, contributing to overall tariffed seafood export losses of about 5% and 10%, respectively, from a year earlier. China was the largest export market for these goods in B.C. ($257 million), and second largest in Nova Scotia ($610 million) in 2024.
Some provinces have been able to offset weaker Chinese exports by shifting to other markets.
Tariff removals expected to bring relief but uncertainty remains
The removal of tariffs on seafood, peas, and canola meal is expected to provide meaningful relief to the Prairies, parts of Atlantic Canada, and B.C.—regions that have, so far, not been able to fully offset export losses. For these provinces, the tariff removals significantly reduce downside risks to our forecasts this year.
For the Prairies, the reduction in the tariff rate on canola seed from 75.8% to 15% marks a meaningful improvement, though the remaining levy may still pose some friction.
Canadian canola competes in a global marketplace—and it is still not clear that a buyer in China will be more willing to pay a 15% tariff than a 75.8% tariff when canola is available from other countries on tidewater at global prices without tariffs. But, early evidence is positive that alternative markets can be found for displaced Canadian canola, and potentially quite quickly (see above).
At the farm level, producers (price takers in a global market) are more likely to respond to price signals than to tariff changes alone. The truce provides some added confidence heading into the 2026 seeding season with canola prices tracking broadly in line with levels observed at this time last year.
Have headwinds shifted from agriculture to auto sector?
Canada will now allow imports of up to 49,000 Chinese EVs at a preferential tariff rate of 6.1%, well below 100% applied in October 2024. This would bring Chinese imports roughly 28% above 2023 levels, prior to the introduction of tariffs on EVs.
At first glance, the scale of the concession appears relatively modest. At a quota of 49,000 units, Chinese EVs would account for slightly less than 3% of vehicle registrations in the year ending Q3 2025. If the quota rises to around 70,000 units over the next five years, imports will still represent less than 4% of total annual vehicle sales.
But, the reduction in tariffs serves as a reminder the Canadian manufacturing sector does not only face threats from U.S. trade disruptions, but also from competitive pressures from offshore manufacturing powerhouses like China.
Near-term relief, longer-term questions
The proposed truce is expected to deliver near-term relief for some Canadian exporters, but tariffs on canola meal, lobster, crab, and peas are only guaranteed through the end of 2026, raising questions about the durability of the move. Tariff removals on canola oil or pork products were also notably absent from the announcement.
The longer-term implications for Canada’s auto sector also remain uncertain and depend on a long list of tariff and non-tariff factors, including regulation. The federal government expects more than 50% of Chinese EV imports could be priced below $35,000 by 2030, potentially increasing competitive pressure on domestic manufacturers and associated supply chains. By comparison, the average cost for an EV in Canada sits near $70,000.
Salim Zanzana is an economist for RBC. He focuses on emerging macroeconomic themes, ranging from international trade to shifts in the long-term structural growth of Canada and other global economies
- Data for this report is compiled from Industry Canada’s Trade Data Online and does not yet include the November trade data at time of publishing. Statistics Canada’s International Merchandise Trade data for November 2025 showed that while canola seed exports to China posted a small increase in November, they were still down nearly 90% year-over-year. ↩︎
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