Canada Explores Import Tariffs to Potentially Restrict Chinese Electric Vehicles

Last week, the government led by Justin Trudeau announced it would begin a 30-day consultation on July 2nd to explore strategies that may restrict Chinese-made electric vehicles (EVs) from entering the Canadian market. This decision follows the U.S. imposing a 100% tariff on electric vehicles from China. Similarly, the European Union is considering raising tariffs to 48% on specific models.

Canada is now weighing options including imposing tariffs on imported vehicles and forbidding Chinese investments in building new factories in Canada. A recently released document indicated that the Canadian government is contemplating tariffs exclusively on fully assembled vehicles, sparing batteries, and battery components.

The consultation aims to solicit views from various stakeholders including unions, and auto and parts manufacturers. According to the published consultation document, Canada’s electric vehicle sector faces challenges due to the surge in Chinese EV exports, buttressed by China’s extensive state support characterized by non-market policies.

The Chinese government’s subsidies to its auto makers allow them to export EVs at prices that other countries view as excessively low. The protective steps taken by the U.S., and under review in Canada, aim to defend their markets. The exact tariff rates and vehicle categories to be affected are still uncertain.

The discussion paper also mentions the potential scenario of Chinese automakers initiating manufacturing operations within Canada to evade tariffs, and calls for viewpoints on whether further actions such as policy directions, monitoring, or investment restrictions from Chinese entities in the Canadian EV sector might be necessary.

Two additional issues are open for public feedback. One questions whether EVs made in China should be ineligible for Canadian subsidies. Another is focused on the data privacy and security issues concerning connected vehicles and their infrastructure.

As reported by Automotive News, Tesla vehicles produced at the Shanghai plant constitute most of the Canadian imports of electric vehicles from China. Finance Minister Chrystia Freeland has yet to disclose whether these will be affected by the tariffs.

The consultation period will end on August 1, setting the stage for a month of robust discussion.