Consider Affordability Before Imposing High Tariffs on Chinese EVs, Urges Clean Energy Canada

Last week, Canada launched a 30-day public consultation to assess whether and how to implement tariffs or trade measures on Chinese-made electric vehicles (EVs). While automotive groups are pushing for substantial, US-style tariffs, Canada’s smaller trade influence compared to the U.S. places it in a challenging predicament.

After reviewing whether any trade rules have been violated, the federal government needs to find a balanced approach. The current tariff on Chinese EVs is 6 percent, significantly lower than the harsh 100 percent tariff enacted by the U.S., and also below the 17 to 38 percent range considered by the European Union. Furthermore, raising the tariff could breach international trade laws and provoke retaliatory measures from China.

It’s crucial to protect Canada’s emerging EV industry, which could provide employment for 250,000 Canadians by 2030, while balancing relations with its two largest trading partners. Equally important is ensuring that Canadians have access to affordable EVs amid cost-of-living and climate crises.

Despite the cost benefits of lower fuel expenses, the scarcity of affordable EVs on Canadian lots is problematic. Any rash trade decision could further restrict available models and increase prices.

For example, the Chevrolet Bolt, priced at $40,000 and further reduced with government incentives, has made EV ownership feasible for many Canadians. However, production of the Bolt has been suspended until the 2026 model year. Additionally, the newly imposed U.S. tariff has delayed sales of China-manufactured Volvo EX30 in the U.S. until 2025, which would have been a direct competitor to the Bolt.

Existing EV manufacturers like Tesla and Polestar, who produce vehicles for the Canadian market in China, could also suffer from these tariffs. As reported by BloombergNEF, tariffs and protectionist measures could impede global EV adoption in the short term.

Other measures, such as restricting Chinese components in EVs eligible for incentives, also carry risks. For instance, stringent regional content requirements in the U.S. have sharply reduced the number of rebate-eligible EV models, a situation that could potentially mirror in Canada.

All EVs produce less carbon over their lifetime compared to gasoline cars, irrespective of their origin. Therefore, policies that unnecessarily slow EV adoption also hinder climate progress. With an electricity grid that’s over 80 percent emission-free, Canada needs to pursue significant reductions in transportation emissions through increased EV adoption.

While Canadian-made EVs could offer additional environmental and economic benefits, few are expected before 2027 or 2028. We should avoid penalizing consumers and hindering our climate goals in the interim, instead providing incentives as Canadian EVs enter the market.

Canada should also consider the point in the supply chain at which tariffs are applied. Tariffs on final assemblies could affect companies like Volvo and Tesla, yet many North American automakers depend on Chinese components, including batteries, which could lead to increased costs for Canadian consumers if taxed.

There are alternative strategies to support our EV sector while making vehicles more affordable. Canada should ensure its EV rebate program continues until more domestically manufactured vehicles become available. Similarly, regions like Ontario, a hub for vehicle assembly, should consider introducing rebates now to benefit local EV production in the future.

This issue presents a spectrum of choices to address concerns regarding Canadian labor, competitiveness, and vehicle affordability. Any policy response should aim to enhance the competitiveness of our auto industry and EV pricing, considering the interests of the consumers.

This post is based on an article authored by Mark Zacharias and originally published in The Toronto Star.