China’s advanced auto industry may face some speed bumps at home, but it is expanding abroad at a dizzying speed. More recently, it has become a question of “when” rather than “if” those vehicles could come to the United States.
The year 2026 already looks like some dominoes are starting to fall. You had Strong display of the Geely range at CES (It is implied that the first advertisement in the United States It could come in the next few years), President Donald Trump repeated Openness to Chinese automakers establishing factories in the United States, and now, Trade agreement between Canada and China This will lower tariff barriers to Chinese electric vehicles in America’s neighbor to the north. So where do things go from here?
The must-read morning report on electric vehicle news and technology.
Welcome back to Critical materialsour morning report on auto industry and technology news. We’ll dive deeper into today’s China trade deal, along with why it’s good news for Tesla, and why this debate falls into the ongoing affordability crisis. Let’s dig.
25%: Canada’s electric vehicle tariff agreement with China puts the United States and the auto industry on alert.
Geely and Zucker at CES 2026
Photography: Patrick George
As we reported on Friday, the deal between China and Canada is small at the moment, capped at 49,000 cars in its first year, with expansion to 70,000 cars within five years. But it’s the start (or rather a reboot, since it brings Canada back into a tariff agreement before 2023) of something potentially big: the growing expansion of Chinese electric vehicles in North America. As Canadian Prime Minister Mark Carney has explicitly said, most of these imports will cost less than US$25,000 (about $35,000 CAD).
Of course, not everyone is happy about what could pose a threat to North American auto jobs. Democratic Hawaii Sen. Brian Schatz blamed strained relations between the Trump administration and Canada, reports say. The hill:
“We just got caught up in this deal between Canada and China. A blatant foreign policy failure with domestic economic consequences,” Schatz wrote in a post on the social media platform X.
He added: “The basic principle in politics and geopolitics is loyalty to friends. We were not only disloyal, we were hostile. And here we are.”
President Donald Trump, for his part, appeared to give his approval to the deal: “If you can make a deal with China, you should do it,” Trump told reporters. Other US economic officials said Canada would eventually regret the deal.
My colleague Kevin Williams He has a good story about what’s at stakeAnd why leaders in Canada’s auto parts are particularly unhappy with the deal. It’s raising a lot of concern among U.S. auto industry observers as well. from news agency:
Chinese automakers will have to meet standards required for the Canadian auto market for the latest trading arrangements to be successful — standards similar to those in the United States — which will likely spur Chinese investment in auto manufacturing in Canada.
They will also have to decide which market segment to target there: high-end vehicles, or less expensive vehicles that sell in larger quantities.
Regardless, “it brings it back to what is needed to compete globally,” said Mark Wakefield, global auto market leader at AlixPartners. The company expects Chinese brands to represent 30% of the global market by 2030.
“They actually started in Europe. They started in South America. And now in Mexico and Canada,” Wakefield said. American automobile manufacturersYou don’t want to end up Brazilian with your ethanol-based cars that can’t be sold anywhere else in the world And… like Britain or Australia, which were important in the world of cars, and are no longer of real importance.
I stress above, because this is a truly scary outcome for the US auto industry.
Then again, if it brings more affordable zero-emission hybrid options to North America — and the way things are likely to go, including the US — is it that bad? Ultimately, North America will have to choose between affordability or loyalty to domestic production.
Unless, of course, our automakers are able to meet people halfway and get the $50,000 average new car price down significantly.
50%: The trade deal between Canada and China is good news for Tesla
2026 Tesla Model 3 Standard
Photo by: Tesla
Tesla had a bad year in Canada in 2025, With sales falling by approximately 64% Amidst the US trade war and CEO Elon Musk’s multiple controversies. But a China trade deal could be good news for the electric automaker: it makes a large number of cars in China, including ones it exports to Canada (as opposed to the US).
Now, those products may be a lot cheaper. here Reuters With more:
While many Chinese automakers will be keen to seize the opportunity as they expand their exports, Tesla has an advantage because in 2023 it has already outfitted its Shanghai factory, its largest and most cost-efficient in the world, to build and export a Canada-specific version of the Model Y.
The American automaker that same year began shipping cars from Shanghai to Canada, boosting Canadian imports of cars from China to its largest port, Vancouver, by 460% year-on-year to 44,356 in 2023.
But it was forced to stop in 2024 and switched to shipping from its factories in the United States and Berlin after Ottawa imposed 100% tariffs, citing its desire to counter what they called China’s deliberate state-directed policy on excess capacity.
“This new agreement could allow those exports to resume very quickly,” said Sam Fiorani, vice president of research firm AutoForecast Solutions.
Now, let’s see if Canadians are actually lining up to buy these cars.
75%: Concern about affordability will define the auto market in 2026
Photography: Patrick George
But all this, I think, is not even a technological issue or a geopolitical issue: it is a question of affordability. The appeal of Chinese imports is that they are good and cheap, a combination that feels in short supply in the North American auto market.
according to Car NewsConcern over affordability was the mood at the 2026 Detroit Auto Show. While automakers may be breathing a sigh of relief that they’re no longer under the regulatory gun to make so many electric vehicles now that fuel economy requirements have been relaxed, they can’t rely on expensive gas trucks to save the day like they used to:
“What’s holding the market back is definitely affordability and the lack of lower-priced vehicles,” said Michael Robinett, executive director of automotive consulting at S&P Global Mobility. “Not just in the United States, but around the world, this is a problem.”
Sen. Bernie Moreno, a former auto dealer and member of the committee working to reschedule the certification of Detroit 3 CEOs, said the Trump administration is loosening regulations to help lower vehicle costs and that automakers also have a role to play. The government has been working to roll back emissions standards, and in September scrapped a $7,500 tax break that had dramatically increased demand for electric cars.
It now takes about 36 weeks of average income to buy an average new car, according to data from Cox Automotive. That’s down from 42 weeks three years ago, but not necessarily a sign that affordability has improved significantly, said Erin Keating, executive analyst at Cox.
“Even with more affordable cars, fewer buyers are buying. The consensus is that this shift is not temporary. … This is one reason dealer sentiment reflects concern. Lost customers are not being marginalized. They are essentially being excluded.”
How do they plan to face this moment? According to this story, Stellantis, the parent company of Jeep and Ram, is preparing more models priced under $40,000 and up to $30,000 (although I’ll believe the latter when I see it) and even Ford has said it might consider making sedans again after canceling them all together in 2020.
One bright spot for electric car enthusiasts: Lower battery costs It should make electric power more affordable. But clearly the demand is there for new cars that won’t break the bank. If familiar automakers cannot meet their commitments, the China company appears ready to do so.
100%: How important is where your car is made?
Photography: Zakir
I’ve owned a Toyota made in the US, a Chevrolet and a Mazda made in Mexico, and a Kia made in South Korea (which is now made in Georgia instead), among other things. I cannot say that the origin of production means much to me in a globalized world.
Is this a priority for you when buying a car? Sound off in the comments.
Contact the author: patrick.george@insideevs.com
