Canada imposes a 100% tariff on electric vehicles from China

Taking a page from 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 producers.

Speaking in Halifax, Nova Scotia, where he was reunited with the rest of his cabinet for a series of meetings on the economy and foreign relations, Prime Minister Justin Trudeau unveiled the new policy that consists of a tax of 100% on electric cars and 25% on steel and aluminum. The EV tariff will come into effect on October 1 and it will also include certain hybrid passenger cars, trucks, buses and delivery vans. It will be added to an existing 6.1 percent tariff that applies to Chinese electric vehicles, the government said in a press release.

The tariffs on aluminum and steel will take effect on October 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 October 1.

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

“We are transforming Canada’s automotive sector to become a global leader in building the vehicles of tomorrow,” the premier 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 Canadian machinery and dedicated metal workers.”

Canada, an export-led economy that relies heavily on trade with the US, has closely watched the Biden administration’s moves to erect a much larger tariff wall against electric vehicles, batteries, solar cells, steel and other Chinese products. Canada’s auto sector is heavily integrated with that of its nearest neighbour: the vast majority of its light vehicle production, worth 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 tougher approach to China’s vehicle exports and becoming a closer trading ally with the US. In June, it announced a public consultation on possible measures to make it harder for Chinese companies to sell electric vehicles in the Canadian market. During an interview with Bloomberg News in July, she said the tariff consultation could 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 taxes within one year of their entry into force.

We previously reported that the European Union has also announced new proposed tariffs on China’s major electric vehicles, albeit at lower levels than the US and now Canada are proposing. Products manufactured by SAIC Motor Corp. face additional taxes of 36.3 percent, while Geely Automobile Holdings Ltd. and BYD Co. face tariffs of 19.3% and 17%, respectively, according to a draft decision published last week. Tesla Inc. will charge an additional 9% tax on vehicles made in China.

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 tattoo will be on Canada’s bum: Beijing previously retaliated against Canada when it restricted imports of Canadian canola seed for three years, a move seen as punishment for Canadian authorities’ decision 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 rose to $2.2 billion ($1.6 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 increased after Tesla began shipping Model Y vehicles there from its factory in Shanghai.

However, the Canadian government’s main concern is not 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 plans to lobby lawmakers and officials about its plans to enter the country.

Trudeau also faced political and industry pressure. The Canadian auto industry has pushed to raise tariffs to protect domestic jobs and wages, arguing that China’s electric vehicles are cheaper because of much lower labor standards. The government also bet big on automakers and manufacturers from democratic allies: The government agreed to provide multibillion-dollar subsidies for electric vehicle plants or battery factories to Stellantis NV, Volkswagen AG and Honda Motor Co., among others.

Canadian steel and aluminum producers have also publicly and repeatedly called on the government to restrict China’s access, saying Xi’s industrial policy allows the Asian powerhouse to unfairly flood foreign markets, putting local jobs at risk.

By Zerohedge.com

More top reads from Oilprice.com