Canadian agriculture is the early winner in China deals, RBC says

RBC economist Salim Zanzana said in a Feb. 2 report that Canada and China’s recent de-escalation of trade tensions should provide near-term relief for exporters in the Prairies and coastal regions, particularly those in agriculture and seafood that have faced material losses from reduced Chinese market access.

Under the agreement, China will remove 25% tariffs on Canadian seafood, peas, and canola meal, and sharply reduce tariffs on canola seed to 15% from 75.8%, effective March 1. In exchange, Canada will lower tariffs on Chinese electric vehicles to 6.1% from 100%, allowing imports of up to 49,000 EVs this year.

Zanzana said the EV quota would result in Chinese vehicles accounting for less than 3% of Canadian registrations in the year ending Q3 2025, suggesting the immediate impact on the auto market is limited. However, he cautioned that the shift underscores longer-term competitive pressures facing Canada’s manufacturing sector.

China’s tariffs had an immediate and pronounced effect on canola exports. Canola seed shipments to China effectively fell to zero in September and October 2025, contributing to a roughly 60% decline in exports to China from January through October compared with 2024. Overall, Canada’s canola exports declined about 13% over that period, while farm cash receipts fell 9% despite record production.

Zanzana noted that trade flows were already adjusting before the tariff rollback. Exports of canola seed to markets outside the U.S. and China more than doubled in 2025 to October from a year earlier, partially offsetting lost Chinese demand. The share of Canadian canola seed exports going to China had already fallen from nearly 80% in September 2024 to less than 50% following Canada’s earlier tariffs on Chinese EVs and metals, suggesting exporters anticipated retaliatory action.

The impact of tariffs was concentrated regionally. Saskatchewan, Alberta, and Manitoba — which together account for roughly $4-billion of Canada’s $6-billion in canola seed exports — saw export declines of 10%, 10%, and 15%, respectively, in 2025 to October. Coastal provinces were hit hardest on seafood, with exports to China down roughly 30% in both British Columbia and Nova Scotia, contributing to broader seafood export declines.

RBC said the removal of tariffs on seafood, peas, and canola meal should reduce downside risks to its near-term economic forecasts for the Prairies, Atlantic Canada, and British Columbia. While the remaining 15% tariff on canola seed still poses friction, Zanzana said the reduction meaningfully improves market access, even as Canadian canola continues to compete globally against untariffed suppliers.

At the farm level, the economist said producers are more likely to respond to price signals than tariff changes alone, adding that the agreement provides some added confidence heading into the 2026 seeding season, with canola prices tracking broadly in line with year-ago levels.

On the auto side, Zanzana said the tariff concession highlights a shift in risk. Even if EV import quotas rise to 70,000 units over the next five years, Chinese vehicles would still represent less than 4% of annual sales, but competitive pressure could intensify over time. Federal projections suggest more than 50% of Chinese EVs could be priced below $35,000 by 2030, compared with an average EV price near $70,000 in Canada today.

Zanzana concluded that while the truce offers near-term relief for agriculture, longer-term uncertainty remains around both the durability of tariff removals, currently guaranteed only through 2026, and the evolving implications for Canada’s auto sector and broader industrial base.

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