Canada's China EV tariff plan draws debate over best approach

Monique Mulima and Brian Platt, Bloomberg News

Automotive and environmental groups are at odds over how far Canada should go in imposing new tariffs on Chinese-made electric vehicles, as Prime Minister Justin Trudeau’s government weighs levies to protect the domestic industry.

The European Union announced last week that it was increasing tariffs on EVs from China to as much as 48 per cent. That followed a move by the U.S. in May to boost its own such tariffs to as much as 102.5 per cent.

As Canada makes final decisions on its plan, stakeholders are debating whether the country should adopt the more restrictive tariffs of its neighbour to the south or take a softer approach. That discussion is adding a new wrinkle to an effort that’s aimed at preventing cheap Chinese EVs from undercutting the market, while still encouraging consumer adoption of cleaner vehicles.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the industry would like to see Canada materially match the U.S. tariffs.

“Four out of five cars made in Canada are sold in the U.S., so there’s a reasonable expectation of North American partners that Canada reciprocates,” he said in an interview. Still, any new tariffs should be imposed “carefully, with consideration for what the Chinese response might be.”

Ontario Premier Doug Ford also called on Canada to match the U.S. tariffs. The provincial government would like to see federal government use every tool possible to do this, Ontario Economic Development Minister Vic Fedeli said in an interview.

“This is not about our relationship with China,” Fedeli said. “This is really all about our relationship with our closest ally, our No. 1 trading partner, the U.S. And it’s also about protecting the 120,000 good-paying auto jobs in Ontario.”

China is Canada’s second-largest trading partner, behind the U.S. Auto and parts imports from China that year totaled $6.7 billion (US$4.9 billion), according to Statistics Canada. By contrast, Canada is much less important to China, accounting for just 2 per cent of the Asian nation’s trade flows.

While Chinese auto brands don’t currently sell cars in Canada, many of the EVs imported into the country last year were Tesla Inc. models made in Shanghai.

Some environmental groups are skeptical of hiking tariffs due to fears that higher prices will hamper consumer adoption electric vehicles. Nate Wallace, clean transportation program manager at Environmental Defence, said he’s glad the government will likely do consultations, adding that China’s weak labor standards are a problem. But he still sounded a note of caution.

“Tariffs are maybe a second-best option,” Wallace said in an interview. “The first-best option being: How do we do we start to level the playing field between western carmakers and China without raising EV prices?”

If Canada does hike tariffs, Wallace said he prefers the European Union model, rather than the U.S. one.

“We need to have an approach that makes sure we’re protecting wages and jobs in Canada for the auto industry, but also doesn’t actually remove that incentive for automakers to innovate and catch up to China, which is what we ultimately want,” he said.

 

Canada prepares potential tariffs on Chinese EVs after U.S. and EU moves

Brian Platt, Bloomberg News

Prime Minister Justin Trudeau’s government is preparing potential new tariffs on Chinese-made electric vehicles to align Canada with actions taken by the U.S. and European Union, according to people familiar with the matter.

The government still has to make final decisions on how to proceed, but it’s likely to announce soon the start of public consultations on tariffs that would hit Chinese exports of EVs into Canada, according to officials who spoke on condition they not be identified.

Trudeau has been under increasing pressure at home and abroad to follow the lead of U.S. President Joe Biden’s administration, which announced in May a plan to nearly quadruple tariffs on Chinese-manufactured electric vehicles, up to a final rate of 102.5 per cent. The European Union said last week it plans to increase tariffs on Chinese EVs, taking those levies as high as 48 per cent on some vehicles.

Western democracies are increasingly concerned about China’s overproduction of key goods, seeing it as an effort to dominate supply chains and undercut their own industries. Battery-electric vehicles have become a major target as Chinese firms such as BYD Co. move aggressively into global markets.

On Thursday, Ontario Premier Doug Ford accused China of taking advantage of low labour standards and dirty energy to make inexpensive EVs. He called on Trudeau’s government to at least match the Biden tariffs. “Unless we act fast, we risk Ontario and Canadian jobs,” he said on the social media platform X.

The value of Chinese electric vehicles imported by Canada surged to $2.2 billion last year, from less than $100 million in 2022, according to data from Statistics Canada. The number of cars arriving from China at the port of Vancouver jumped more than fivefold after Tesla Inc. 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 flooding the market.

Publicly, Trudeau and his cabinet ministers have said they’re monitoring what other countries are doing, but haven’t committed to new tariffs. The prime minister told reporters on Thursday he had “significant conversations” about Chinese production at the Group of Seven leaders’ summit in Italy last week.

A spokesperson for Finance Minister Chrystia Freeland said Canada is “actively considering next steps to counter Chinese oversupply,” but didn’t address if tariffs are being prepared.

“China has an intentional, state-directed policy of overcapacity,” Katherine Cuplinskas, Freeland’s press secretary, said in an email. “Protecting Canadian jobs, manufacturing, and our free trade relationships is essential.”

Canadian auto industry groups have called on Canada to impose stiff tariffs. They’ve warned that Canada can’t afford to be offside with the U.S. on this issue, given the upcoming review of the United States-Mexico-Canada free trade agreement. The U.S. and Canada have tightly integrated auto supply chains, with parts and finished vehicles flowing across the border in huge quantities. The vast majority of Canada’s auto production is exported to the U.S. 

However, Trudeau has moved carefully, given the possibility of Chinese trade retaliation. Some environmental groups argue that it’s most important to keep EV costs low to encourage higher consumer adoption.

Trudeau’s administration and Doug Ford’s government in Ontario have promised to pour billions into building a domestic electric-vehicle industry, from mining critical minerals for batteries all the way to assembling cars and light trucks.

That includes multibillion-dollar subsidies for major new factories proposed by Volkswagen AG, Chrysler owner Stellantis NV, and Honda Motor Co. 

 

Trudeau must match U.S. tariffs on Chinese imports, Ontario premier says

Laura Dhillon Kane, Bloomberg News

The leader of Canada’s most populous province called on Prime Minister Justin Trudeau to impose tariffs on Chinese imports, including at least a 100 per cent levy on electric vehicles, to mirror the Biden administration’s policy.

Ontario Premier Doug Ford accused China of taking advantage of low labor standards and dirty energy and flooding the market with cheap EVs. “Unless we act fast, we risk Ontario and Canadian jobs,” Ford said in a statement on the social media platform X.

Ontario represents about 40 per cent of Canada’s economy and is the heartland of its automotive and manufacturing industries. General Motors Co., Ford Motor Co., Toyota Motor Corp. and other major automakers all have assembly plants in the southern part of the province, making cars and light trucks primarily for export to the U.S. 

Last month, the White House announced sweeping tariff hikes on Chinese goods, including quadrupling tariffs on Chinese electric vehicles to bring the rate to 102.5 per cent. Canada imposes only a small tariff of about 6 per cent on Chinese-made vehicles, but they’re still a relatively small part of the market. 

Trudeau and other Canadian officials have said they’re monitoring the U.S.-China trade battle, but have not committed to following Biden’s lead. The European Union last week announced additional tariffs on electric cars shipped from China — making Canada appear more isolated on the issue. 

Trudeau told reporters on Thursday his government is watching its allies’ actions closely and he had “significant” conversations about this topic at the Group of Seven summit last week.

“We will look very carefully at what steps need to be taken to ensure that the Canadian auto industry and indeed Canadian consumers are well supported for years to come,” he said. 

In his social-media post, the Ontario premier said over the past four years, his province has secured $43 billion (US$31.4 billion) worth of investments in electric vehicle and battery manufacturing. Some of those investments have been lured by promises of billions in public money to match incentives in the U.S. Inflation Reduction Act. 

“We can never take our progress for granted,” Ford said. “Now’s the time to work with our U.S. partners to deepen and strengthen homegrown, U.S.-Canada supply chains.”