Canada Caught in the Crossfire as China Tightens Grip on EV

By Parujee Akarasewi | May 23, 2026

China restricts export of key minerals for electric vehicles, impacting global supply chains.

OTTAWA — When Chinese authorities began restricting exports of the rare earth minerals that power electric vehicles, the ripple effects were felt far beyond the factories of Detroit and Shanghai. Canadian consumers, autoworkers, and farmers are now grappling with the fallout of a mineral showdown they had little say in starting.

China controls roughly 80% of the world's rare earth processing capacity and more than 90% of its graphite supply — materials essential for the batteries and motors that drive EVs. Beginning in late 2024 and escalating through 2025, Beijing imposed a series of export controls on these materials, widely seen as retaliation against U.S. semiconductor restrictions. Canada, deeply intertwined with both economies, has found itself squeezed from all sides.

Sticker Shock at the Dealership

For Canadians shopping for an EV, the timing could hardly be worse. Purchase incentives have been rolled back, and supply disruptions in lithium, graphite, and rare earth metals have pushed up manufacturing costs — costs that get passed directly to buyers.

The numbers tell the story: according to Statistics Canada, EV registrations fell by roughly one third in the first three quarters of 2025, placing Canada well behind most comparable nations in the global shift to electric vehicles.

"Affordable EV options have largely disappeared from the Canadian market," noted one recent policy analysis, pointing to a combination of higher prices and dampened consumer confidence.

Electric vehicle charging amid a backdrop of rising costs, highlighting the scarcity of affordable EV options in Canada.

Assembly Lines Under Pressure

The stakes extend well beyond the showroom floor. Electric mobility is projected to account for 61% of Canada's transport sector GDP and 58% of its employment by 2040 — a future that now looks increasingly uncertain.

The alarm bells are ringing loudest in Ontario, home to Canada's auto manufacturing heartland. U.S. imports of Canadian-made EVs plummeted nearly 96% in the first two months of 2026 compared to the same period last year, a staggering drop that has industry insiders warning of deeper structural damage ahead.

The cause is a double bind: Washington's 25% tariff on Canadian automobiles and auto parts, introduced following the so-called "Liberation Day" announcement in April 2025, has effectively shut Canadian vehicles out of the American market, just as supply chain disruptions make them more expensive to build.

Farmers Dragged Into the Fight

Perhaps the most unexpected victims of the mineral dispute are Canada's farmers. When Ottawa introduced a 100% tariff on Chinese EVs in 2024 as a protective measure for domestic industry, Beijing responded not with auto tariffs, but with 100% duties on Canadian canola oil and canola meal, and 25% tariffs on pork and certain seafood products.

Agricultural producers, who had no stake in the EV dispute, suddenly found their largest export markets disrupted. The move was widely seen as a calculated signal from Beijing: in a trade war over minerals and technology, no sector is off limits.

A Silver Lining — If Canada Moves Fast

Amid the turbulence, a significant opportunity is emerging. Canada sits on one of the largest known rare earth deposits in the world — an estimated 13 million tonnes — and holds vast reserves of the lithium, cobalt, graphite, and nickel that the global EV industry desperately needs.

The Fraser Institute highlighted in a January 2026 analysis that as Beijing persists in limiting exports of essential minerals, Canada has a limited opportunity to establish itself as a dependable alternative supplier.

Investment is beginning to flow. Volkswagen's PowerCo battery gigafactory in St. Thomas, Ontario, is already under development, and the federal government has committed funds toward mineral extraction projects in resource-rich regions such as Ontario's Ring of Fire.

A new trade deal struck in early 2026 also offers some near-term relief for consumers, allowing up to 49,000 lower-cost Chinese-made EVs into Canada annually at a reduced 6.1% tariff — reversing the 100% levy introduced just two years prior.

A Long Road Ahead

Analysts caution, however, that the window will not stay open forever. Developing new mines and processing facilities takes years and billions in capital, and internal regulatory barriers continue to slow progress.

For now, Canadians are living with the consequences of a geopolitical mineral struggle playing out thousands of kilometres away — paying more for EVs, watching auto jobs hang in the balance, and hoping their country can turn its geological wealth into economic resilience before the window closes.

Canada Faces Economic Challenges Amid Global Mineral Tensions: Rising EV Costs and Job Uncertainty Highlight the Impact of Export Restrictions and the Urgency of Developing a Strategic Mineral Plan.

This article is based on research from Statistics Canada, the Fraser Institute, Export Development Canada, and multiple trade policy analyses published in 2025–2026.