Canada Hits China With 100% Tariff On Electric Cars

Who needs Trump for an all-out trade war between the West and China.

Taking a page out of Europe’s playbook, Canada will impose staggering new tariffs on Chinese-made electric vehicles, aluminum and steel, lining up behind western allies and taking steps to protect domestic manufacturers.

Speaking in Halifax, Nova Scotia, where he was gathered with the rest of his cabinet for a series of meetings about the economy and foreign relations Prime Minister Justin Trudeau unveiled the new policy which consists of a 100% levy on electric cars and 25% on steel and aluminum. The EV tariff will take effect Oct. 1 and will also include certain hybrid passenger automobiles, trucks, buses and delivery vans. It will be added to an existing 6.1% tariff that applies to Chinese EVs, the government said in a news release.

The levies on aluminum and steel will come into place Oct. 15. The government released an initial list of goods on Monday and the public will have a chance to comment before it is finalized on Oct. 1.

Turdeau’s (sic) government is also launching a new 30-day consultation on other sectors, including batteries and battery parts, semiconductors, solar products and critical minerals.

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“We are transforming Canada’s automotive sector to be a global leader in building the vehicles of tomorrow,” the prime minister told reporters in Halifax. “But actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian autos and metal workers.”

Honda and other automakers have said that they plan to spend billions of dollars building electric vehicle and battery factories in Canada

Canada, an export-driven economy that relies heavily on trade with the US, has been closely watching moves by the Biden administration to erect a much higher tariff wall against Chinese EVs, batteries, solar cells, steel and other products. Canada’s auto sector is heavily integrated with that of its closest neighbor: The vast majority of its light vehicle production, amounting to just 1.5 million units last year, is exported to the US.

Turdeau’s Finance Minister Chrystia Freeland has been one of the most prominent voices in favor of a harder approach to Chinese vehicle exports, and becoming a closer trade ally with the US. In June, she announced a public consultation on possible measures to make it more difficult for Chinese companies to sell electric vehicles in the Canadian market. During an interview with Bloomberg News in July, she said the tariffs consultation might go beyond electric cars.

The government also announced Monday that it will limit eligibility for electric vehicle incentives to products made in countries that have negotiated free-trade agreements with Canada. It will review the new levies within a year of them coming into effect.

We previously reported that the European Union also announced proposed new tariffs on electric vehicles important from China, though at lower levels than the US and now Canada are proposing. Products made by SAIC Motor Corp. face additional duties of 36.3%, while Geely Automobile Holdings Ltd. and BYD Co. each face tariffs of 19.3% and 17%, respectively, according to a draft decision released last week. Tesla Inc. will see an extra 9% charge on Chinese-made vehicles.

Chinese leaders plan to raise the issue of tariffs when US National Security Adviser Jake Sullivan visits this week, according to the official Xinhua News Agency. Sullivan is due to meet with Foreign Minister Wang Yi and may also meet with Chinese leader Xi Jinping.

And now we wait to see what China’s tat will be to Canada’s tit: Beijing previously retaliated against Canada when it restricted imports of Canadian canola seed for three years, a move seen as retribution for a decision by Canada authorities to arrest Huawei executive Meng Wanzhou in Vancouver on a US extradition warrant. Meng returned to China in 2021.  

The value of Chinese electric vehicles imported by Canada surged to C$2.2 billion ($1.6 billion) last year, from less than C$100 million in 2022, according to data from Statistics Canada. The number of cars arriving from China at the port of Vancouver jumped after Tesla started shipping Model Y vehicles there from its Shanghai factory.

However, the Canadian government’s main concern isn’t Tesla, but the prospect of cheap cars made by Chinese automakers eventually becoming available. As Bloomberg reports, BYD informed the Canadian government in July that it intends to lobby lawmakers and officials about its plans to enter the country.

Trudeau also faced political and industry pressure. The Canadian auto sector had been pushing him to hike tariffs to protect domestic jobs and wages, arguing that China’s EVs are cheaper due to much weaker labor standards. The government has also bet big on automakers and manufacturers from democratic allies: the government has agreed to to multibillion-dollar subsidies for electric vehicle plants or battery factories for Stellantis NV, Volkswagen AG and Honda Motor Co., among others.  

Steel and aluminum producers in Canada have also publicly and repeatedly urged the government to restrict China’s access, saying that Xi’s industrial policy allows the Asian powerhouse to unfairly flood foreign markets, putting local jobs at risk.