HALIFAX—Canada is following the U.S. lead and slapping steep new tariffs on Chinese-made electric vehicles and on heavily subsidized Chinese steel and aluminum imports, Prime Minister Justin Trudeau announced Monday morning.
As the Star first reported, Canada’s tariffs on Chinese EVs will match the U.S. level, which quadrupled in May, at 100 percent, effective Oct. 1, in an attempt to protect domestic EV carmakers from a rising tide of cheap imports.
Ottawa also will move to match the U.S. with a 25-per-cent tariff on Chinese-made steel and aluminum imports, which will take effect Oct. 15.
The Liberal government is also weighing whether to impose punitive surtaxes on other Chinese-made goods like semiconductors, solar cells, batteries and battery parts and critical minerals, as Washington has done. But since many auto 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.
When asked if he is concerned about Chinese government retaliatory action on Canadian exports to China, Trudeau said it’s clear China’s government is not just subsidizing its own automakers, 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, he said.
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. Officials who briefed reporters said currently the main supplier of Chinese-made EVs in Canada — imports that are valued at about $1.4 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 its production for the Canadian market to any of those.
The announcement comes a day after a top advisor 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 advisor Jake Sullivan encouraged Canada to consider Chinese EVs as not just an economic threat but as a national security concern.
“Canada will make its own determinations, but the U.S. does believe that a united front, a coordinated 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: “massive subsidies going into the Chinese electric vehicle industry have eliminated a level playing field, and so part of the economic response the U.S. has taken is responding to that.”
“And then there are issues associated with data security, with critical infrastructure, and with the underlying questions of national security associated with connected vehicles, electric vehicles,” he said.
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 weighing.
Biden’s advisor noted that the EU has also hiked tariffs on Chinese EVs and the G7 has made strong statements in support of the U.S. view.
The EU set its tariffs at a lower rate, 38 per cent, and Canadian officials said those were based directly on the rate of subsidization, whereas Canada’s are punitive surtaxes intended to target not just China’s state subsidy rate, but its poor labour and environmental standards as it seeks to dominate markets abroad, not just in EVs, but in steel and aluminum production.
Since 2018, China has sharply increased its steelmaking capacity — despite softening global demand — by more than 18 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.
In May, the Biden administration quadrupled American tariffs on Chinese-made EVs to 100 per cent, blaming unfair Chinese government subsidies to Chinese automakers for “overcapacity.” At the time, Biden also announced raised tariffs on other products including solar cells, computer chips, medical equipment and lithium batteries, and the administration encouraged Canada to follow suit.
Trudeau suggested more tariffs will follow after another 30-day round of public consultations concludes.
Sullivan is now en route to Beijing to meet with China’s foreign affairs minister Wang Yi, one of a series of high-level meetings that the White House said is key to managing an “intensely competitive relationship” and keep it from “veering into conflict.”
Earlier in the summer the Liberal government wrapped up a 30-day public consultation on potential EV tariffs.
Conservative Leader Pierre Poilievre and Premier Doug Ford have both called on Ottawa to slap heavy surtaxes on Chinese EV exports in an effort to protect the nascent EV industry domestically.
Even after Ottawa concluded consultations on EVs, on Aug. 9, the Liberal government launched a broader economic security consultation on supply chain disruptions, rising protectionism and unfair trade practices — which one government source acknowledged is aimed at determining how Canada should confront China on a range of issues which are core to Canadian national security concerns.
This week’s cabinet meetings will see the Liberals looking at ways to advance their priorities for the fall and the months ahead, particularly housing and economic supports for the middle class, as well as examining how to shore up political support in Atlantic Canada.
Ministers will hear briefings by economic and housing policy experts, current and former mayors, along with the current and former Canadian ambassadors in Washington.
This is a developing story.
