Canada considers imposing new import tariffs on Chinese EVs

Canada is seeking public opinion on whether it should join the United States and Europe in imposing new tariffs on Chinese-made electric vehicles.

On July 2, Ottawa will start a 30-day consultation period on potential policy responses “to protect Canada’s auto workers and its growing EV industry” and “prevent trade diversion resulting from recent action taken by Canadian trading partners”, its finance ministry announced on Monday.

Canada’s auto sector faces “unfair competition from China’s intentional, state-directed policy of overcapacity and lack of rigorous labour and environmental standards”, the ministry said.

Announcing the plan on Monday in Vaughan, Ontario, Deputy Prime Minister and Finance Minister Chrystia Freeland said options included tariffs on Chinese EV imports, investment restrictions, and adjustments to federal incentives for electric vehicles, noting that “nothing is ruled out”.

The move comes amid pressure from domestic automakers to increase tariffs to protect jobs. Last week, the premier of Ontario, Canada’s most populous province and primary car manufacturing hub, urged Ottawa to impose tariffs of at least 100 per cent on Chinese-made EVs.

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Chinese-made electric vehicles face additional EU import tariffs of up to 38%

Chinese-made electric vehicles face additional EU import tariffs of up to 38%

Canada has been coordinating with its allies since several of them made similar actions only weeks ago. In mid-May, despite extremely low imports, Washington announced a tariff increase on Chinese EVs from 27.5 per cent to 102.5 per cent, along with increased tariffs for lithium-ion batteries and other clean energy products produced in China like solar cells.

Brussels said this month that it would impose provisional tariffs of between 17.4 per cent and 38.1 per cent on Chinese-made EVs, on top of the EU standard of 10 per cent tariff on all EV imports.

Canada already imposes a small tariff of about 6 per cent on Chinese vehicles, and most of Canada’s EV imports from China are Tesla vehicles produced from its Shanghai factory, not from Chinese domestic vehicle makers. But Canadian automakers sounded alarm bells after data from the first four months of 2024 showed a year-on-year increase of over 1,200 per cent in the Canadian dollar value of imports of Chinese EVs.

And with a review of Canada’s free trade agreement with Mexico and the US coming up in 2026, business groups have been urging Ottawa to prevent Canada from being perceived as a side door for inexpensive Chinese goods into North America.

China currently dominates the EV industry. In 2021, almost 80 per cent of all lithium-ion batteries for EVs worldwide originated from China, and the International Energy Agency says nearly 60 per cent of global EV sales as of 2023 are Chinese-made.

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Canadian Minister of Finance Chrystia Freeland announced the 30-day consultation period on potential tariffs. Photo: Reuters

Beijing has consistently rejected assessments of its overcapacity. In response to new tariffs announced by Europe this month, the Chinese foreign ministry said such action “violates market economy principles and international trade rules”.

Days after the European Union action, Beijing announced an anti-dumping investigation into certain pork products from the EU.

Canadian Prime Minister Justin Trudeau’s government has moved cautiously towards increasing tariffs on China, which ranks behind only the US as Canada’s second-largest trading partner. And Canada needs affordable EV options to meet its goal of phasing out sales of certain gasoline-powered vehicles by 2035.

Some Canadian environmental groups have opposed increased tariffs, fearing they will raise prices and hinder consumer adoption of cleaner technology.

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