As global tensions in the electric vehicle (EV) market escalate, Canada is now considering imposing import tariffs on Chinese-made EVs. Deputy Prime Minister Chrystia Freeland recently announced that Ottawa will seek public opinion on this potential move, a step that echoes similar actions taken by the United States and the European Union.
Unfair Competition and Overcapacity Concerns
Freeland highlighted concerns about the domestic car sector facing unfair competition due to China’s “state-directed policy of overcapacity.” This issue has led to a global oversupply of EVs, which undermines producers worldwide, including those in Canada. Beginning July 2, Canada will open a 30-day public consultation period to gather input on how to respond to these challenges.
“Chinese producers are quite intentionally generating a global oversupply that undermines EV producers around the world, including here in Canada,” Freeland stated in Vaughan, Ontario. This sentiment is shared by other global leaders, such as those in the United States and the European Union.
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Alignment with International Allies
Canada’s consideration of tariffs aligns with recent actions by its international allies. Last month, US President Joe Biden announced steep tariff increases on various Chinese imports, including electric vehicles. Similarly, the European Commission is planning to impose additional duties of up to 38.1 percent on Chinese EV producers like BYD, Geely, and SAIC, as well as Chinese-built Tesla and BMW cars .
China’s Response and Market Impact
China has rejected accusations of unfair subsidies or overcapacity issues, attributing its EV industry’s growth to technological advantages, market dynamics, and robust supply chains. An opinion piece in the state-backed Global Times newspaper urged Canada to “remain strategically rational” and avoid sacrificing economic exchanges with China to align with US interests .
The Global Times warned that imposing tariffs on Chinese EVs could undermine market confidence among Chinese investors, worsen bilateral relations, and hinder economic and trade cooperation. This perspective underscores the potential diplomatic and economic ramifications of Canada’s decision.
Domestic Pressure and Strategic Positioning
Domestically, Prime Minister Justin Trudeau’s government has been under pressure to act against Chinese EV imports. Ontario’s premier recently called for tariffs of at least 100 percent on Chinese-made EVs to protect local jobs. Ontario, Canada’s most populous province and primary car-manufacturing hub, has a significant stake in the outcome of this policy decision .
Freeland emphasized that while the specifics of potential actions remain undecided, all options are being considered. “We’re not ruling anything out,” she said, highlighting the government’s intent to use its strongest trade action tools.
Strengthening Canada’s EV Supply Chain
Canada has been actively working to position itself as a critical player in the global EV supply chain. The country has secured deals worth billions of dollars to attract companies involved in various parts of the EV supply chain, aiming to bolster its manufacturing base in Ontario .
US-China EV trade war
As Canada contemplates joining the US-China EV trade war, the potential imposition of tariffs on Chinese electric vehicles could have significant implications for global trade dynamics. Public consultations will play a crucial role in shaping the government’s policy response, balancing the need to protect domestic industries with maintaining international trade relations. The outcome of this decision will be closely watched by stakeholders in the automotive and trade sectors worldwide.
