Canada is exploring higher tariffs on Chinese EVs, trade minister says
, Bloomberg News
Canada is examining whether it needs to raise tariffs on Chinese-made electric vehicles after the White House announced major new levies on them, Trade Minister Mary Ng said.
“We are looking at this very carefully and we have an open dialogue with our American partners,” Ng said in a phone interview from Peru, where she’s attending meetings of the Asia-Pacific Economic Cooperation forum.
The Biden administration announced sweeping new tariffs against China this week, targeting semiconductors, solar cells and other products. The new U.S. tariff on Chinese-manufactured electric vehicles will take effect this year, with a final tariff rate of 102.5 per cent, up from 27.5 per cent.
Canada imposes a small tariff of about 6 per cent on Chinese vehicles. Asked whether it may need to align its own tariffs with the U.S., Ng said again the government is speaking with U.S. officials about the policy, “and we are absolutely looking at this.”
Ng stressed that Canada’s main focus is on producing electric vehicles domestically. She pointed to agreements that Prime Minister Justin Trudeau’s government has signed with automakers such as Honda Motor Co. and Volkswagen AG to make electric vehicles, batteries or components in Ontario, Canada’s most populous province.
The country’s auto sector is highly integrated with U.S. vehicle makers; parts and finished cars and trucks flow easily across the border between Ontario and key U.S. manufacturing states such as Michigan and Ohio.
Chinese factories have a very small share of Canada’s auto market, but the country has recently witnessed a surge of imports of Chinese-made Tesla Inc. models manufactured in Shanghai.
The number of cars arriving from China at the port of Vancouver rose more than fivefold last year, to about 44,400, after Elon Musk’s automaker started shipping Model Y vehicles from there.
If Canada follows U.S. lead on Chinese EV tariffs, impact could be huge
, BNN Bloomberg
In a strategic election-year manoeuvre, U.S. President Joe Biden has introduced substantial tariff increases on various Chinese goods, aiming to strengthen domestic production in crucial sectors. This initiative, designed to shield American labour and businesses from what Biden deems unfair practices such as theft and dumping of under-priced goods, nearly quadruples tariffs on Chinese electric vehicles (EVs) and extends tariffs to semiconductors, batteries, solar cells, and critical minerals.
According to the White House, these amendments will affect approximately US$18 billion of annual imports. Biden described these tactics by China as not merely competitive but outright cheating, highlighting the detrimental impacts they've had on the American economy. The move aims to safeguard the burgeoning U.S. EV sector from competitive pressures posed by Chinese manufacturers.
“We do not have first mover advantage; the Chinese are so far ahead of everybody,” says Ian Lee, associate professor of management at the Sprott School of Business at Carleton University. “And [according to the International Energy Agency], they have 60 per cent world market share of EVs. They are so far ahead of the U.S. and Canada it's not funny.”
The Biden administration is also intensifying its scrutiny of Chinese automotive companies in Mexico as concerns grow that China may find ways to bypass the new tariffs.
The U.S. Trade Representative, Katherine Tai, indicated that the government is vigilant about Chinese efforts to establish manufacturing bases in Mexico, which could serve as a backdoor for Chinese EVs into the U.S. market.
Adding to the complexity, BYD Co., a leading Chinese EV manufacturer, this week revealed ongoing negotiations to build an EV plant in Mexico, with plans to finalize the location by year-end. This development follows the introduction of BYD's first truck in Mexico, marking a significant step in the company's expansion strategy in the region.
Could Canada and other countries follow suit?
German Chancellor Olaf Scholz and Swedish Prime Minister Ulf Kristersson have cautioned the European Union against emulating the United States' approach of imposing import duties on Chinese electric vehicles (EVs). Speaking at a joint press conference in Stockholm on Tuesday, Kristersson emphasised the importance of global trade and warned against the repercussions of a broader trade war.
“It is fundamentally a bad idea to dismantle global trade,” Kristersson said when questioned about potential EU tariffs on Chinese cars. He acknowledged the need for a level playing field and recognised the potential for disruptions in sourcing, but stressed that blocking each other’s products is not conducive for industrial nations like Germany and Sweden.
Chancellor Scholz echoed these sentiments, highlighting the collaborative efforts between Germany and Sweden in advancing energy transitions, particularly in wind and hydrogen power, and expanding their innovation partnership in defence and space.
Major impact
Ian Lee cautions that were Canada to impose similar tariffs, it would have some fairly negative repercussions. “If Canada was to follow suit and put tariffs on, it would make EVs unaffordable for most people except for perhaps the top 20 per cent of the population. And so I think that there's going to be a political blowback if they went down that road.”
The Government of Canada is aiming to phase out the sale of new combustion vehicles by 2035 – requiring zero-emission vehicles to make up all new car sales in their place. To that end, the federal government and several provincial governments have been striving to secure a share of the North American EV market for Canada. They have already pledged substantial funds to attract other manufacturers, including Honda Motor Co. and Stellantis NV, to build out their EV supply chain in this country.
Imposing tariffs, according to Mr Lee, could prevent that goal from being met. “If we want to get to 100 per cent and the Americans are blocking Chinese EVs coming in to the United States, we're going to have to import them directly from China to meet that target, or we're going to have to extent reduce the aggressiveness of that target of 100 per cent EV [sales] by 2035 to allow domestic North American industry to build up and respond ... there's some very tough trade off decisions that will have to be made.”
Chinese-made Teslas pour into Canada as Biden erects U.S. tariff wall
, Bloomberg News
The Biden administration is quadrupling U.S. tariffs on electric vehicles manufactured in China. But Chinese-made cars are still finding their way into a receptive North American market — just to the north.
Canada is seeing a surge of imports of Chinese-made EVs, particularly Tesla Inc. models made in Shanghai. The number of cars arriving from China at the port of Vancouver rose more than fivefold last year, to 44,400, after Elon Musk’s automaker started shipping Model Y vehicles made there.
The situation is drawing howls of protest from some auto-industry players who want Prime Minister Justin Trudeau to follow the White House and do more to protect the domestic industry.
Canada imposes only a small tariff on Chinese-made vehicles — about six per cent. It also allows consumers to tap a federal rebate program when they buy foreign-manufactured EVs. Since Tesla started exporting from its Shanghai factory last year, many purchasers have begun using that incentive.
“Here you can buy a Tesla made in Shanghai and get a $5,000 purchase incentive that is funded by Canadian taxpayers — including the Canadian companies who are competing with Tesla for that vehicle purchase,” Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said in an interview.
“We’ve raised this publicly, we’ve raised it privately, everything short of yelling at the moon from the top of a mountain to get somebody to close that door,” he said. “And it’s wide open. It’s noticed in the U.S.”
Officials with Canada’s transportation department did not reply to requests for comment.
Three of every 10 EVs buyers requesting Canada’s federal rebate in the year ended March 31 bought a Tesla, according to data from Transport Canada — totaling some 51,000 cars. Some provincial governments, such as British Columbia, offer additional rebates worth thousands more dollars to EV buyers.
Canada remains a relatively nascent market for Chinese-made vehicles compared with Mexico, where companies including BYD Co. and Anhui Jianghuai Automobile Group Co. have made huge inroads over the past decade with relatively cheap cars. Among Asian countries exporting EVs into Canada, Japan and Korea still dominate.
And, as in the U.S., electric vehicles remain a relatively small part of the Canadian auto market. Canadians registered about 185,000 battery electric and plug-in hybrid electric vehicles last year — an increase of nearly 50 per cent from the year before, but still only 11 per cent of all new vehicle registrations.
The subsidies for purchasers are an attempt to drive that number higher. Trudeau’s government has set an ambitious target — 60 per cent of all new light-duty vehicles sold in the country should be zero-emission by 2030, the government says, and 100 per cent by 2035.
Volpe and others say that’s too aggressive, and that Canada’s goals should align more closely with the U.S. The Biden administration’s recent auto-emissions rules would potentially boost battery electric vehicles to more than 50 per cent of the market by 2032, according to modeling from the U.S. Environmental Protection Agency.
Teslas sold in Canada come from Shanghai or Fremont, California, according to the company’s Canadian sales center. The company declined to comment how many vehicles exported to Canada originated at each plant. Customers can request the manufacturing location from the company, or find it with their vehicle identification number.
Canadian car dealers have started to see a growing number of Teslas manufactured in China appearing on the used car market, too, according to Huw Williams, a lobbyist for the Canadian Automobile Dealers Association. He expects that the disparity between Canadian and U.S. policy will grow in importance.
“A legitimate question for Canadian policymakers to address is how the Biden announcement and how some of the influx of products from overseas — which countries it’s coming from — affects the Canadian mix,” Williams said. “I think you’re going to see more and more attention paid to that issue here in Canada as a result.”
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