According to Bloomberg on March 31, U.S. Ambassador to Canada Pete Hoekstra stated that Canadian Prime Minister Mark Carney reached a tariff agreement with China in January this year, allowing Chinese electric vehicles (EVs) to enter Canada. The U.S., however, will not permit Chinese EVs to enter the American market via Canada, even if these vehicles are legally sold in Canada.
Hoekstra told Rebel News in an interview: “These cars can enter Canada from China, but they will not cross the border into the United States. That will not happen.” He cited national security risks associated with the data collection and transmission by these vehicles.
However, Hoekstra did not specify the exact method of enforcement, including whether it would involve refusing documents required for resale in the U.S., a total cross-border ban, or other administrative restrictions. In recent years, the U.S. has introduced regulations limiting the sale and import of connected vehicles that use Chinese or Russian technology. The White House did not immediately respond.
In 2024, Canada imposed a 100 percent tariff on Chinese EVs to align with the then-President Biden’s policy. This move triggered retaliatory tariffs from China on some Canadian agricultural products, such as canola. After Trump took office last year, he imposed additional tariffs on Canadian cars, putting further pressure on bilateral auto trade.
According to financialpos, Ambassador Hoekstra said on a podcast that Canada had not experienced a significant impact from tariffs and that the current U.S.-Canada trade agreement remained the world’s “second best.” He noted that, except for industries like automobiles, lumber, steel, and aluminum, most Canadian goods can still enter the U.S. duty-free if they meet the rules of the USMCA (United States–Mexico–Canada Agreement).
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Reports indicate that under tariff pressures from the U.S. and China, Canada has adjusted its policies. In January this year, Carney reached a tariff agreement with Chinese President Xi Jinping allowing Chinese EVs to enter Canada at lower tariffs, with an initial quota of 49,000 vehicles in the first year. In exchange, China agreed to reduce tariffs on certain food imports, including canola and lobster.
Although Trump has repeatedly emphasized bringing auto manufacturing back to the U.S., Hoekstra noted that Canada is not a primary focus in America’s global trade reshaping. The U.S. does not see Canada as a major threat to the auto industry, nor does it assume that auto manufacturing would necessarily shift back from Canada to the U.S.
He said: “On the auto issue, Canada is not our main concern. You can fully tell your story to the U.S. Trade Representative, explaining why Canada should be included in the lowest tariff category.”
Hoekstra also highlighted that the U.S. and Canadian auto industries are highly integrated, with most Canadian-made vehicles containing significant American components. “Among vehicles crossing the border, 50 percent to 75 percent of the parts are made in the U.S. That is exactly the type of vehicles we welcome.”
He added that the main competitive pressure on the U.S. auto industry comes from South Korea, Japan, and Mexico, while China is seen as the largest long-term threat. “Our greatest threats come from South Korea, Japan, and Mexico; these are where policy can really bring manufacturing back to the U.S. China, on the other hand, is the biggest challenge.”
Entering the US market is not easy
For years, the U.S. and Canada have tried to prevent low-cost, high-tech Chinese EVs from weakening domestic automakers’ competitiveness. Canada might now provide China with a foothold, allowing Chinese automakers to learn U.S. consumer preferences and access the only major global market they have not yet penetrated.
Politico reports that a significant gap remains between Chinese EVs and American consumers. One major barrier is the up to 100 percent tariff set by the Biden administration in 2024, due to concerns that Chinese government subsidies artificially lower vehicle prices, undermining U.S. automakers’ competitiveness.
Cybersecurity restrictions are another barrier, affecting all Chinese EVs, even those produced in Canada. This regulation, established by the Biden-era Department of Commerce, prohibits the sale of vehicles with hardware or software connected to large networks or linked to any Chinese entity.
Finally, convincing consumers to buy a new brand is difficult. Buyers usually sign only when confident the automaker has a reliable after-sales service network. This challenge affects all new market entrants, including domestic EV manufacturers like Tesla.
Investigation into forced labor products
Canada has been included in a Section 301 trade investigation targeting countries that allegedly allow goods produced with forced labor to enter supply chains, competing with U.S. (or Canadian) products and potentially displacing them.
Johnston from the China Strategic Risk Institute told CBC News: “Human Rights Watch released a very detailed report exposing forced-labor aluminum in Chinese EVs and components; each car contains dozens of parts using such aluminum.”
She said the U.S. investigation could result in up to a 25 percent tariff on Canadian exports. As the investigation progresses, “they will assess our enforcement efforts against forced labor.”
The USMCA also requires Canadian and U.S. officials to cooperate to prevent goods made with forced labor from entering the North American market. Any lapse could become a mandatory review issue this year.
According to the CBC, Human Rights Watch noted that Xinjiang lacks the capacity to process aluminum into complex alloys needed for the auto industry, producing only “unalloyed” aluminum ingots—raw metal blocks for transport. The report warned: “Once aluminum ingots are melted and mixed with other materials, it is impossible to determine how much came from Xinjiang.”
The report also highlighted that, unlike other global automakers addressing forced labor in their Chinese supply chains, BYD has provided no transparency. Tesla, however, responded more actively, tracing its supply chain to the mineral level in multiple cases, without finding evidence of forced labor. Tesla’s Shanghai Gigafactory produces cars for export.
As BYD prepares to establish itself in the Canadian EV market, companies using fair-trade Canadian aluminum and steel for auto parts face losses beyond market share. The reputation of Canada’s auto industry remains at risk.