HALIFAX—Canada is following the U.S. lead and slapping steep new tariffs on Chinese-made electric vehicles and heavily subsidized steel and aluminum imports, Prime Minister Justin Trudeau said Monday — a move that drew swift condemnation by Chinese officials.
As the Star first reported, Canada’s tariffs on Chinese EVs will match the U.S. level, which quadrupled in May, at 100 per cent in an attempt to protect domestic EV carmakers from a rising tide of cheap imports. Canada’s EV tariffs will take effect Oct. 1.
In addition, Ottawa will match the U.S. with a 25-per-cent tariff on Chinese-made steel and aluminum imports, to take effect Oct. 15.
The Liberal government is now weighing whether to impose additional punitive surtaxes on a broad range of other Chinese-made goods like semiconductors, solar cells, batteries and battery parts and critical minerals, as Washington has.
Since many auto and battery makers use a lot of Chinese inputs, it’s a more complicated step to take without knowing the collateral damage that could be caused for domestic producers, and so the Trudeau government kicked off another intense 30-day consultation period.
The Chinese embassy in Ottawa denounced Canada’s moves in a statement to Bloomberg, condemning them as an act of trade protectionism that disregards global free trade rules.
It warned the tariffs “will undermine the normal economic and trade co-operation between China and Canada, harm the interests of Canadian consumers and enterprises, and be detrimental to Canada’s green transformation and global efforts to combat climate change.” It suggested there would be retaliation if Canada didn’t reverse course: “China will take all necessary measures to safeguard the legitimate rights and interests of Chinese enterprises,” the statement said.
China blocked Canadian exports of canola, pork and beef during a dispute with Canada over the 2018 arrest of a Chinese Huawei executive.
When asked if he is concerned about Chinese government retaliatory action on Canadian exports to China, Trudeau dodged a direct answer. China’s government is not only subsidizing its automakers, he said, it is “not playing by the same rules as other countries” when it comes to labour and environmental standards.
“What is important about this is we’re doing it in alignment and in parallel with other economies around the world that recognize that this is a challenge that we are all facing, and unless we want to get in a race to the bottom, we have to stand up” to China’s unfair trade practices, the prime minister continued.
The new 100-per-cent EV tariff applies to electric and certain hybrid passenger automobiles, trucks, buses, and delivery vans, the government said, and it comes on top of a 6.1 per cent tariff that Canada currently applies to EVs produced in China and imported into Canada.
Ottawa will also limit rebates for EV purchases to cars coming from countries that have free trade deals with Canada — in other words, not China.
Officials who briefed reporters said the main supplier of Chinese-made EVs in Canada — imports that are valued at about $2.2 billion — is Tesla, which produces EVs in Shanghai.
However, they said Tesla has four other manufacturing facilities that supply the American market and it could shift production for the Canadian market to any of those.
Canada has invested billions of taxpayer dollars to draw investments by international automakers to build EV battery plants and an industrial supply chain here, yet the Liberal government says there is a big difference in what it is doing and what China does.
“The reality is, China has an intentional state directed policy of overcapacity and oversupply designed to cripple our own industries,” said Deputy Prime Minister and Finance Minister Chrystia Freeland. “Talk to the steel sector, talk to the aluminum sector, to understand how effective that has already been, and we simply will not allow that to happen to our EV sector, which is showing such promise and in which we have invested so effectively.”
The announcement comes a day after a top adviser to U.S. President Joe Biden urged Canada to join the Americans and EU in imposing penalties on cheap Chinese state-subsidized products flooding global markets.
U.S. national security adviser Jake Sullivan said Chinese EVs are not just an economic threat but also a national security concern.
“Canada will make its own determinations, but the U.S. does believe that a united front, a co-ordinated approach on these issues benefits all of us,” Sullivan said.
Sullivan spoke to reporters Sunday evening in Nova Scotia where he met with Trudeau and his cabinet — a surprise visit at the Liberal retreat — and ahead of a high-level visit Sullivan makes this week to Beijing.
Sullivan said the U.S. sees “two distinct challenges” connected with Chinese EVs: the “massive subsidies” that “have eliminated a level playing field,” and concerns about “data security, with critical infrastructure, and with the underlying questions of national security associated with connected vehicles, electric vehicles.”
Canadian officials agreed that with the development of sophisticated software used in those vehicles comes a higher risk of privacy and security breaches, one that Ottawa is now examining.
Sullivan underscored that the EU has also hiked tariffs on Chinese EVs and the G7 has made strong statements in support of the U.S. view.
Since 2018, China has sharply increased its steelmaking capacity — despite softening global demand — by more than 18 million metric tonnes, an amount that exceeds all of Canada’s steel production capacity, and has now become the world’s largest steel producer. It is likewise jacking up aluminum production, Canadian officials suggested.
Conservative Leader Pierre Poilievre and Premier Doug Ford have both called on Ottawa to slap heavy surtaxes on Chinese EV exports.
On Monday, Poilievre’s deputy leader Melissa Lantsman said Trudeau did not go as far as the Conservatives would, and commit to tariffs on semiconductors and other products.
Ford applauded the move.
“This is welcome news for Canadian workers that puts us onside with the U.S., our closest friend and trading partner. It’s never been more important to do everything we can to strengthen Canada-U.S. supply chains,” Ford said Monday on X.
Some environmentalists, however, said raising the price of EV imports only makes achieving Canada’s climate goals more elusive.
“Unfortunately, Canada made a decision today that will result in fewer affordable electric vehicles for Canadians, less competition, and more climate pollution,” said Joanna Kyriazis, of Clean Energy Canada.
Domestic automakers and auto parts manufacturers welcomed the move to align Canadian and American tariff policy.
Flavio Volpe, head of the Canadian Autoparts Manufacturers Association, posted on “X” his members “feel vindicated and motivated” by the government’s move, after a yearlong lobbying effort to highlight “the importance of standing up to the Chinese government’s challenge to Western manufacturing economies.”
With a file from Rob Ferguson, Queen’s Park bureau
