Canada to Impose New Tariffs on Chinese Electric Vehicles, Steel, and Aluminium

 

Canada is set to introduce significant new tariffs on Chinese-made electric vehicles (EVs), steel, and aluminium, in alignment with its Western allies and in an effort to protect domestic manufacturers. The Canadian government plans to levy a 100% tariff on electric vehicles and a 25% tariff on steel and aluminium imports from China. Prime Minister Justin Trudeau is expected to announce the new policy in Halifax, Nova Scotia, where his cabinet is meeting to discuss economic and foreign policy matters.

Key Points:

1. Alignment with U.S. and Western Allies:

   • Canada's decision follows similar moves by the U.S. and the European Union to impose tariffs on Chinese products, particularly in the EV sector. The U.S. recently introduced steep tariffs on Chinese EVs, batteries, and steel, while the EU has proposed additional duties on Chinese EV imports.

2. Impact on Canadian Auto Industry:

   • Canada’s auto sector, heavily integrated with that of the U.S., is a significant part of the country’s economy. The majority of the 1.5 million light vehicles produced in Canada last year were exported to the U.S. The new tariffs are designed to protect this industry from what Canada views as unfair competition from Chinese automakers benefiting from state-directed overcapacity.

3. Political and Economic Justifications:

   • Finance Minister Chrystia Freeland, a strong advocate for the tariffs, has argued that China’s industrial policies are undermining Canada’s ability to compete in the EV sector. The Canadian government’s primary concern is the potential influx of cheap Chinese-made EVs, which could undercut domestic jobs and wages.
   • The government has already committed significant subsidies to support EV and battery plants in Canada, partnering with manufacturers from democratic allies such as Stellantis NV, Volkswagen AG, and Honda Motor Co.

4. Broader Economic Tensions:

   • The tariffs come amid broader economic and geopolitical tensions between China and Western countries. Canada has previously experienced retaliation from China, such as the restriction of canola seed imports following the arrest of Huawei executive Meng Wanzhou.
   • The value of Chinese EVs imported into Canada surged to C$2.2 billion last year, reflecting a rapid increase in imports, particularly of Tesla vehicles from its Shanghai factory. However, Canadian concerns are focused on the potential market entry of cheaper vehicles from Chinese automakers like BYD.

5. Industry and Political Pressure:

   • The Canadian auto sector and steel and aluminium producers have been lobbying the government for increased tariffs, arguing that Chinese products benefit from unfair advantages due to weaker labor standards and state-supported overcapacity.

Conclusion: The introduction of these tariffs by Canada is part of a broader strategy to protect domestic industries from what it perceives as unfair competition from China. The move aligns Canada with the U.S. and other Western allies in their approach to trade with China, particularly in sectors deemed critical for future economic growth, such as electric vehicles. The impact of these tariffs on Canada-China relations and on the global trade environment remains to be seen.