- Canada’s federal government will hold public consultation around imposing new tariffs on Chinese-made electric vehicles
- Deputy Prime Minister Chrystia Freeland told reporters that Ottawa would open a 30-day consultation period on July 2
- This measure aims to protect Canada’s EV supply chain from what Ottawa describes as unfair Chinese competition
- The European Union will charge duties of up to 38.1 per cent on imported Chinese-made EVs as of July 4
Cheap Chinese electric vehicles (EVs) are gaining popularity around the world, but their time in Canadian car lots may have stalled.
The federal government will hold public consultation around imposing new tariffs on Chinese-made EVs. Deputy Prime Minister Chrystia Freeland told reporters in Vaughan, Ontario, this week that Ottawa would open a 30-day consultation period on July 2.
This measure aims to protect Canada’s EV supply chain from what Ottawa describes as unfair Chinese competition.
Freeland, alongside International Trade Minister Mary Ng, made the announcement, emphasizing the importance of safeguarding domestic investments and jobs in the EV sector. This move follows similar steps taken by the United States and European Union earlier this year to hike import tariffs on Chinese-made EVs, amid accusations of unfair subsidies by China.
Ontario Premier Doug Ford has also called on the federal government to match U.S. tariffs, which recently increased tariffs on Chinese EVs from 25 per cent to 100 per cent. “We need to ensure a level playing field for our manufacturers,” Ford said, echoing the federal government’s sentiment.
The U.S. tariffs on Chinese electric vehicles (EVs) are part of a broader trade conflict between the two countries that has been ongoing since 2018. The tariffs were implemented as a response to various trade practices by China that the U.S. government considers unfair, such as intellectual property theft and forced technology transfer.
The tariffs on Chinese EVs have added a significant cost to Chinese EVs imported into the U.S., making them less competitive compared to domestically produced EVs or those imported from other countries not subject to the tariffs.
The impact of these tariffs on the market has been substantial. They have influenced the pricing and availability of Chinese EVs in the U.S., potentially slowing their adoption. Additionally, the tariffs have prompted some Chinese manufacturers to consider establishing production facilities outside of China to circumvent the tariffs and better access the U.S. market.
The situation is dynamic, with ongoing negotiations and changes in trade policy potentially affecting the future of these tariffs and their impact on the EV market.
Before any tariffs can be imposed, the Canadian International Trade Tribunal must complete an anti-subsidy investigation. Currently, the only Chinese-made EVs entering the country are Tesla (NDAQ:TSLA) models manufactured at the company’s Shanghai facility.
China’s role in Canada’s EV industry extends beyond vehicle imports. It is a major supplier of batteries and battery components, areas where Canada has invested heavily over the past four years. In 2021, China produced nearly 80 per cent of the world’s lithium-ion batteries for EVs, and the International Energy Agency reports that Chinese-made vehicles now constitute almost 60 per cent of global EV sales.
The European Commission, still finalizing its own anti-subsidy investigation, has provisionally set tariffs on Chinese EVs between 17 per cent and 38 per cent, effective July 4. This decision may be adjusted as Europe and China engage in negotiations.
Chinese-branded EVs have seen a significant rise in the European market, jumping from 1 per cent in 2019 to 8 per cent currently, largely because of their lower prices compared with European-made models. Preliminary findings in Europe suggest that these vehicles benefit from “unfair subsidization.”
In Canada, the outcome of the consultation process will determine the next steps. A government insider revealed that such consultations typically precede the imposition of specific tariffs. Prime Minister Justin Trudeau has indicated that Canada is closely watching the situation and will make its decision accordingly.
On June 12, after the European Commission’s announcement of provisional tariffs, Minister Ng said Canada was actively developing its strategy. “We are working on it, and I’ve been very clear about this,” Ng told reporters. “This issue is one that we’re concerned about.”
Ng also mentioned ongoing discussions with Canadian industry stakeholders. The initiation of an anti-subsidy investigation usually begins with a formal complaint from the industry, highlighting the significant investments Canada has made in the EV supply chain.
In a “quick facts” section within the government’s news release on this announcement, the ministry stated that Canada’s automotive sector builds more than 1.5 million vehicles every year – one every 21 seconds. It supports nearly 550,000 direct and indirect jobs, contributed C$18 billion in 2023 to Canada’s GDP and is one of the country’s largest export industries.
The consultation period will provide an opportunity for industry stakeholders and the public to voice their opinions on the proposed tariffs, shaping the future of Canada’s EV market and its global competitiveness.
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(Top photo: File)