China’s advanced auto industry may be hitting some speed bumps at home, but it’s expanding overseas at warp speed. And lately it’s been a question of “when,” not “if,” those vehicles could ever come to the United States.
2026 already feels like some dominoes have begun to fall. You had the Geely Group’s strong showing at CES (and hints that a U.S. debut announcement could come in the next few years), President Donald Trump’s repeated openness to Chinese automakers setting up factories in the U.S., and now, a trade deal between Canada and China that will lower tariff barriers to Chinese EVs in America’s neighbor to the north. So where do things go from here?
The must-read morning roundup of EV and tech news.
Welcome back to Critical Materials, our morning roundup of auto industry and technology news. We’ll be diving more into the China trade deal today, along with why it’s good news for Tesla, and why this debate is caught up in the ongoing affordability crisis. Let’s dig in.
25%: Canada’s EV Tariff Deal With China Puts The U.S., Auto Industry On Alert
Geely and Zeekr at CES 2026
Photo by: Patrick George
As we reported on Friday, the China-Canada deal is small for now—it’s capped at 49,000 cars for its first year, with expansion to 70,000 within five years. But it’s a start (or rather a restart, since it returns Canada to its pre-2023 tariff deal) to something potentially big: the growing expansion of Chinese EVs into North America. And as Canadian Prime Minister Mark Carney explicitly said, most of these imports will cost under $25,000 U.S. (about $35,000 CAD).
Naturally, not everyone is happy about what could be a threat to automotive jobs in North America. Sen. Brian Schatz, D-Hawaii, blamed the Trump administration’s strained relations with Canada, reports The Hill:
“We just got absolutely rolled in this Canada – China deal. A stark foreign policy failure with domestic economic consequences,” Schatz wrote in a post on social platform X.
“The most basic principle in politics and geopolitics is loyalty to friends. And we weren’t just disloyal – we were hostile. So here we are,” he added.
President Donald Trump, for his part, appeared to give the deal a thumbs-up: “If you can get a deal with China, you should do that,” Trump told reporters. Other U.S. economic officials said Canada will ultimately regret the deal.
My colleague Kevin Williams has a good story about what’s at stake, and why leaders in the auto-producing parts of Canada are especially unhappy about the deal. And it brings plenty of concern among U.S. auto industry observers as well. From the Associated Press:
Chinese automakers will have to meet standards required for the Canadian auto market for the latest trade arrangement to be successful—standards that are similar to those in the U.S.—which is likely to incentivize Chinese auto manufacturing investment in Canada.
They’ll also have to establish which segment of the market they are targeting there: Higher-end vehicles, or less-expensive ones that sell at higher volumes.
Regardless, “It brings it home to what is needed to compete globally,” said Mark Wakefield, global automotive market lead at AlixPartners. The firm predicts Chinese brands will account for 30% of the global market by 2030.
“They’ve already started in Europe. They started in South America. Now Mexico and Canada,” Wakefield said. American carmakers “don’t want to end up as a Brazil with your ethanol-based cars that aren’t sellable anywhere else in the world and … like Britain or Australia that used to matter in the auto world, and no longer really matter.”
Emphasis mine above, because that is indeed a scary outcome for the U.S. auto industry.
Then again, if it brings more affordable hybrid and zero-emission options to North America—and the way things are potentially going, the U.S. included—and is that such a bad thing? Ultimately, North Americans will have to make a choice: affordability or loyalty to local production.
Unless, of course, our automakers can meet people halfway and get that $50,000 average new car price down considerably.
50%: The Canada-China Trade Deal Is Good News For Tesla
2026 Tesla Model 3 Standard
Photo by: Tesla
Tesla had a bad year in Canada in 2025, with sales dropping nearly 64% amid the U.S. trade war and CEO Elon Musk’s multiple controversies. But the China trade deal could be good news for the electric automaker: it builds a ton of cars in China, including ones it exports to Canada (unlike the U.S.)
And now, those just got a whole lot cheaper, potentially. Here’s Reuters with more:
While many Chinese automakers will be keen to seize the opportunity as they expand exports, 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.
The U.S. automaker had that same year started shipping the car from Shanghai to Canada, boosting Canadian imports of automobiles from China to its largest port, Vancouver, by 460% year over year to 44,356 in 2023.
But it was forced to stop in 2024 and switched to shipping from its U.S. and Berlin factories after Ottawa imposed 100% tariffs, citing a wish to counter what they called China’s intentional state-directed policy of overcapacity.
“This new agreement could allow resumption of those exports rather quickly,” said Sam Fiorani, vice president of research firm AutoForecast Solutions.
Now, to see if Canadians actually line up to buy those cars.
75%: Affordability Anxiety Will Define 2026’s Car Market
Photo by: Patrick George
But all of this, I’d argue, isn’t even a technology issue or a geopolitical one: it’s an affordability issue. The appeal of Chinese imports is that they’re good and they’re cheap—a combination that feels in short supply in the North American car market.
According to Automotive News, affordability anxiety was the overwhelming vibe at the 2026 Detroit Auto Show. And while carmakers may breathe a sigh of relief that they’re no longer under a regulatory gun to make tons of EVs now that fuel economy requirements have been eased, they can’t lean on super-expensive gas trucks to save the day like they used to:
“What’s holding the market back is certainly affordability and really the lack of low-priced vehicles,” said Michael Robinet, executive director of automotive consulting at S&P Global Mobility. “Not only in the United States, but around the world, this is a problem.”
Sen. Bernie Moreno, a former car dealer and member of the committee working to reschedule testimony from the Detroit 3 CEOs, said the Trump administration is easing regulations to help bring down vehicle costs and that automakers also have a role to play. The government is rolling back emissions standards and in September eliminated a $7,500 tax credit that had greatly fueled EV demand.
It now takes about 36 weeks of median income to buy an average new vehicle, according to Cox Automotive data. That’s down from 42 weeks three years ago but not necessarily a sign affordability has significantly improved, Cox Executive Analyst Erin Keating said.
“Even with affordable vehicles out there, fewer buyers are buying. The consensus is that this shift isn’t temporary. … That’s one reason dealer sentiment reflects concern. The missing customers aren’t sidelined. They’re essentially excluded.”
So how do they plan to meet the moment? According to that story, Jeep and Ram parent company Stellantis is preparing more models priced under $40,000 and even $30,000 (though I’ll believe the latter when I see it) and even Ford said it might consider making sedans again after canceling all of them in 2020.
One bright spot for EV fans: the falling costs of batteries should make electric power more affordable. But clearly, the demand is there for new cars that won’t break the bank. And if the familiar automakers won’t deliver, it seems China Inc. is ready to.
100%: How Much Does It Matter To You Where Your Car Is Made?
Photo by: Zeekr
I have owned Toyotas made in the United States, a Chevrolet and a Mazda made in Mexico, and a Kia made in South Korea (that’s now made in Georgia instead), among other things. I can’t say that production origin means all that much to me in a globalized world.
So is that a priority for you when you buy a car? Sound off in the comments.
Contact the author: patrick.george@insideevs.com
