Morning Markets for Friday, Jan. 16, 2026

Morning Markets - Canada-China Trade Deal Summary

Key Concepts:

• Canada-China Trade Deal: A new agreement easing tariffs on Chinese EVs entering Canada in exchange for reduced levies on Canadian canola exports.
• Tariffs: Taxes imposed on imported goods, impacting trade and pricing.
• Annualized Rate: A rate extrapolated to represent a year's worth of data, used for housing starts.
• Geopolitical Tensions: Global uncertainties impacting oil prices and trade.
• KUZMA (Canada-United States-Mexico Agreement): A trade agreement potentially impacted by the new Canada-China deal.
• EV (Electric Vehicle): Vehicles powered by electricity, a growing sector with implications for auto manufacturing.
• Canola: A key Canadian agricultural export, subject to Chinese tariffs.
• Supply Chain: The network of processes and entities involved in producing and distributing goods.

1. Canada-China Trade Agreement Details

Prime Minister Mark Carney announced a new trade deal with China, effective March 1st. Key components include:

• Reduced EV Tariffs: Canada will allow 49,000 Chinese-made EVs annually with a 6.1% tariff rate, down from 100%. This number is roughly equivalent to the number of Chinese EVs imported in 2023.
• Reduced Canola Tariffs: China will lower tariffs on Canadian canola seed to 15% (from 80-84%), canola meal, lobster, crab, and peas will be tariff-free. Canola oil remains subject to a 100% tariff.
• Temporary Nature: The canola tariff reductions are set to expire at the end of the year, creating uncertainty about the long-term impact.
• Potential for Future Investment: Carney expressed hope for future partnerships and investment in the Canadian auto sector from Chinese companies.

2. Economic Indicators & Market Performance

• Housing Starts: Canadian housing starts increased by 11% in December, reaching an annualized rate of over 280,000 units. Ontario, Montreal, and Vancouver saw the largest increases. This follows a period of softness due to economic uncertainty.
• First Quantum Minerals: The Panamanian government authorized the removal and processing of materials at the Panama copper mine, a positive step but not a full reopening after the mine was taken over in 2023.
• Market Performance: The TSX was slightly down (0.19%) but still up nearly 4% for the year. The S&P 500 and Dow Jones were also slightly down, while the NASDAQ was nearly unchanged.
• Canola Futures: Canola futures rose by 2.6% following the announcement, the highest increase since December, indicating positive market reaction for canola farmers.

3. Concerns & Criticisms of the Deal

• Ontario Premier Doug Ford: Strongly condemned the deal, arguing it gives China a foothold in the Canadian market at the expense of Canadian workers and invites a flood of cheap EVs.
• Unifor (Canadian Union): National President Lana Payne expressed significant concerns about the impact on the Canadian auto sector, fearing increased competition and potential job losses. She highlighted the risk of repeating the negative experiences seen in other countries with significant Chinese EV imports.
• US Reaction: Analysts anticipate a negative reaction from the White House, given the US previously pressured Canada to impose 100% tariffs on Chinese EVs.
• Potential for Escalation: Concerns were raised about the possibility of escalating quotas for Chinese EV imports over time.

4. Perspectives on the Deal's Rationale

• Lawrence Steinberg (Laurence Steinberg Wealth Management): Viewed the deal as a necessary step for Canada to avoid being overly reliant on the US and to support Canadian canola farmers. He believes the 49,000 EV quota is relatively small and manageable.
• Michael Green (Simplify Asset Management): Suggested the deal positions Carney in opposition to Trump, appealing to a populist base. He cautioned that Canada is following a path similar to the US in the early 2000s, potentially leading to a de-skilling of its exports.
• Daniel Breton (Electric Mobility Canada): Highlighted the potential for increased affordability in the EV market and the need for Canada to diversify its automotive partnerships, especially given the US’s increasingly protectionist stance.

5. Oil Market & Geopolitical Factors

• Oil Price Volatility: Oil prices edged higher after a turbulent week, influenced by ongoing protests in Iran and shipping disruptions.
• Geopolitical Risks: Concerns about potential disruptions to oil production in Iran and elsewhere are adding pressure to prices.
• Demand vs. Supply: Disagreements exist among analysts regarding future oil demand, with OPEC projecting higher demand than the EIA (Energy Information Administration).
• Investment in Power Infrastructure: Increased demand for electricity from data centres is driving investment in power production, particularly in the US.

6. Labour Market Data (US)

• Unemployment Rate: US unemployment rates fell, but largely due to increased retirements and recovery in government jobs.
• College-Educated Unemployment: Unemployment among college-educated individuals is relatively high, raising concerns about the broader economic outlook.

7. Notable Quotes

• Mark Carney: "This number [49,000 EVs] allowed in is about the same that they allowed in from China back in 2023."
• William Pellerin: "If Canadian consumers start loving these vehicles, and it kind of changes the outlook on the Chinese electric vehicles at low prices and good quality vehicles, then that that could be potentially the start of something new in the Canadian market."
• Lawrence Steinberg: "I don't think so [we didn't give up the farm]. I don't think so. That was my concern because we don't it doesn't feel like we're necessarily negotiating from a position of power."
• Lana Payne (Unifor): "Opening the doors to, to cheap Chinese imports is just going to make this even harder [to save auto jobs in Canada]."

Synthesis/Conclusion:

The Canada-China trade deal represents a complex compromise with potential benefits for Canadian canola farmers and consumers seeking more affordable EVs. However, it has sparked significant concerns within the Canadian auto industry and labour unions, who fear increased competition and job losses. The deal’s long-term impact will depend on factors such as the US response, the evolution of EV demand, and the development of a Canadian EV supply chain. The agreement also highlights Canada’s desire to diversify its trade relationships and reduce its reliance on the US, but this comes with inherent risks and requires careful management.