Will Canada impose tariffs on Chinese EVs? Ottawa launches consultation

The Canadian government is launching a consultation process on how to tackle the “oversupply” of Chinese-made electric vehicles – including potential tariffs — in the global market, Finance Minister Chrystia Freeland said on Monday.

Freeland said the 30-day consultation process will begin on July 2. While tariffs and a surtax on Chinese-made EVs are likely to be the focus after the U.S imposed tariffs on the vehicles, Freeland said they are considering a range of policy options.

“The potential policy actions we are consulting on include a surtax on imports of Chinese EVs under section 53 of the Customs Tariff Act, changes to which cars are eligible for the existing federal incentives for Zero Emissions Vehicle Program, and potentially broader investment restrictions in Canada,” Freeland said.

Freeland said the measures were necessary because of what she termed unfair trade practices.“Chinese producers are quite intentionally generating a global oversupply that undermines EV producers around the world, including here in Canada,” she said.

In 2021, almost 80 per cent of all lithium-ion batteries for electric vehicles globally came out of China and the International Energy Agency says almost 60 per cent of global EV sales are now Chinese-made.The announcement follows U.S. President Joe Biden’s announcement in mid-May that he is hiking tariffs on Chinese EVs from 25 per cent to 100 per cent this year though there is only one Chinese EV currently available in the U.S.

Freeland said Canada needs to act in tandem with its allies and major trade partners, particularly the United States.

“Our supply chains are deeply integrated with the United States, thanks to our robust and hard-won free trade agreements. Acting in partnership to support the deeply integrated North American auto sector is essential,” she said.

Canada currently imposes a six per cent tariff on Chinese-made vehicles, but the cars can qualify for up to $5,000 in federal rebates for EV purchases.

Currently, the only Chinese-made EVs imported into Canada are Teslas made at the U.S. tech giant’s Shanghai factory.

China is a bigger player in Canada when it comes to batteries and battery components for EVs, industries Canada has invested heavily in over the last four years.

Some experts believe Canada cannot afford a full-blown trade war with China and must walk a tightrope. Trade Minister Mary Ng said Canada will defend its interests while respecting its international trade obligations.

The Conservatives said that while they support action that prevents the “dumping of cheap Chinese products into our Country,” they said Prime Minister Justin Trudeau was to blame for weaking Canada’s manufacturing capacity.

“Trudeau has failed to protect Canadian auto workers as evidenced by the fact that he has spent tens of billions of dollars subsidizing jobs for foreign replacement workers at EV battery plants, while securing no guarantees for Canadian union workers,” Conservative international trade critic Kyle Seeback said.

Leave a Reply

Your email address will not be published. Required fields are marked *