Canada Slaps 100% Tariff on Chinese Electric Cars
There's no need for Trump to instigate a full-blown trade war between the West and China. Canada is taking a leaf from Europe's book by imposing hefty new tariffs on Chinese-made electric vehicles, aluminum, and steel. The move aligns Canada with its western allies and aims to safeguard domestic manufacturers.
Prime Minister Unveils New Policy
Prime Minister Justin Trudeau, while in Halifax, Nova Scotia for a series of meetings on the economy and foreign relations, revealed the new policy. It involves a 100% levy on electric cars and 25% on steel and aluminum. The electric vehicle (EV) tariff will come into force on October 1 and will also encompass certain hybrid passenger automobiles, trucks, buses, and delivery vans. This will be in addition to the existing 6.1% tariff on Chinese EVs, according to a government press release.
Aluminum and Steel Tariffs
The tariffs on aluminum and steel will be implemented on October 15. The government issued an initial list of goods on Monday, and the public will have the opportunity to comment before the list is finalized on October 1.
New Consultation on Other Sectors
The government is also initiating a 30-day consultation on other sectors, including batteries and battery parts, semiconductors, solar products, and critical minerals.
Transforming Canada's Automotive Sector
"We are transforming Canada's automotive sector to be a global leader in building the vehicles of tomorrow," the prime minister informed reporters in Halifax. He added that countries like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of critical industries and displacing dedicated Canadian auto and metal workers.
Automakers' Plans
Automakers like Honda have stated their intention to invest billions of dollars in constructing electric vehicle and battery factories in Canada.
Canada's Trade with the US
Canada, an export-driven economy that heavily relies on trade with the US, has been closely observing the Biden administration's moves to erect a 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, with the majority of its light vehicle production, amounting to just 1.5 million units last year, being exported to the US.
Canada's Finance Minister's Stance
The Finance Minister, Chrystia Freeland, has been one of the most vocal proponents of a tougher 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 harder for Chinese companies to sell electric vehicles in the Canadian market. She hinted in a July interview with Bloomberg News that the tariffs consultation might extend beyond electric cars.
New Eligibility Limitations and Review of Levies
The government also announced on 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.
European Union's Proposed Tariffs
The European Union has also proposed new tariffs on electric vehicles imported from China, albeit at lower levels than those proposed by the US and Canada. 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.
China's Response
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.
Previous Retaliations
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 Canadian authorities to arrest Huawei executive Meng Wanzhou in Vancouver on a US extradition warrant. Meng returned to China in 2021.
Surge in Chinese EV Imports
The value of Chinese electric vehicles imported by Canada surged to C$2.2 billion ($1.6 billion) last year, up 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 increased after Tesla began shipping Model Y vehicles there from its Shanghai factory.
Concerns Over Cheap Chinese Cars
The Canadian government's main concern isn't Tesla, but the possibility 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.
Political and Industry Pressure
Trudeau has also faced pressure from the political and industry sectors. The Canadian auto sector has been urging him to increase 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 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' Calls
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.
Bottom Line
The escalating trade tensions between Canada and China, especially over electric vehicles, steel, and aluminum, highlight the complex dynamics of global trade. As Canada takes measures to protect its domestic industries, it also risks retaliation from China. This move raises questions about the future of international trade and the potential impact on consumers and businesses. What are your thoughts on this development? Feel free to share this article with your friends. Remember, you can sign up for the Daily Briefing, which is delivered every day at 6 pm.
