- A new trade agreement will see Chinese automakers sell up to 49,000 cars per year in Canada.
- Cars registered in Canada routinely cross the border, though Americans can’t buy them.
China has quickly displaced the U.S. as the center of the global automotive industry, now building and exporting more cars than any other country. But Chinese cars remain an extremely rare sight in the U.S.
That may not be true for long.
Chinese cars have long been effectively barred from both the U.S. and Canada by 100% tariffs. America also bans cars with Chinese-derived software due to security concerns.
But Canada and China have reached a new trade agreement that will allow up to 49,000 Chinese-built cars into the country each year at a 6.1% tariff.
The New York Times reports that the deal also ensures “that China would make a ‘considerable investment into Canada’s auto sector’ within three years, suggesting that Chinese companies would ultimately manufacture cars in the country.”
Canadians Can Drive Into the U.S. Easily
- Canadian license plates are a common sight in northern states, as crossing the border both ways in a car is legal and easy.
Cars registered in Canada routinely cross the border into the U.S. Americans can’t buy them, but Canadians can drive them on American roads with no restrictions for visits up to a year.
They’re particularly common in border states, with perhaps the highest concentration in the Detroit metro area thanks to the popular Ambassador Bridge border crossing.
So, the agreement could see vehicles popular overseas but not well-known in the U.S., driving past the headquarters of America’s largest automakers frequently.
Related: Chinese Automaker May Enter U.S. by 2029
In its early days, the deal could benefit Tesla most. Reuters notes that “Tesla has an advantage as it in 2023 already equipped its Shanghai plant, its biggest and most cost-efficient factory globally, to build and export a Canada-specific version of its Model Y.”
But Chinese automakers like BYD and Geely have explored moving into the Canadian market in the past. Cars like the popular BYD Seal and Xiaomi YU7 might become somewhat familiar sights on Detroit roads.
Once Chinese automakers move into a country’s market, they can quickly come to dominate it thanks to low prices on some very appealing, high-tech cars.
Quotas Have Historical Precedent
- The U.S. used a similar quota system to ease Japanese cars into the American market in the 1980s.
The agreement limits imports to just 49,000 cars per year, with half the total reserved for more affordable models.
But limits like that have history, and don’t always stay limited.
The measure resembles the Reagan administration’s approach to a flood of Japanese-made cars that threatened to overwhelm U.S. automakers in the early 1980s. Reagan’s White House negotiated a voluntary limit on Japanese imports and a technology exchange that allowed American automakers to study how Japanese companies operated.
The deal arguably helped the Detroit Three learn to compete with inexpensive, well-made cars from overseas. But the quotas did not last. Demand for Japanese cars fueled a push to remove quotas. Today, 10 of the 25 best-selling cars in the U.S. are built by Japan-based companies.
