Ottawa considering tariffs to counter flow of Chinese EVs

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OTTAWA — The federal government is “actively considering next steps” to stop the flow of Chinese-made electric vehicles into Canada, which could include new tariffs. But it will need to act fast to ensure that Canada is in lockstep with its economic partners.

Finance Minister Chrystia Freeland’s office would not say Friday if Canada will follow the lead of the United States, which announced in May a plan to slap punishing tariffs of more than 100 per cent on low-priced Chinese EVs to prevent them from flooding the U.S. market.

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But the issue has been top of mind for the Canadian government, which has been heavily subsidizing battery plants and EV manufacturing facilities to counter China’s supply.

“Canada is set to be a global leader in electric vehicle manufacturing. Already, we rank first in the world in attractiveness to build EV battery supply chains — as a result of our abundant natural resources, talented workforce, and close collaboration with the U.S. on incentives,” said Katherine Cuplinskas, Freeland’s deputy director of communications.

“China has an intentional, state-directed policy of over-capacity. We are actively considering next steps to counter Chinese oversupply. Protecting Canadian jobs, manufacturing, and our free trade relationships is essential,” added Cuplinskas.

In a statement on X on Thursday, Ontario Premier Doug Ford called on the federal government to “immediately match or exceed U.S. tariffs on Chinese imports.”

“Taking every advantage of low labour standards and dirty energy, China is flooding the market with artificially cheap electric vehicles. Unless we act fast, we risk Ontario and Canadian jobs,” he wrote, adding that Ontario secured $43 billion worth of investments.

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Prime Minister Justin Trudeau said Thursday that his government is “watching closely” what the U.S. and other allies, like the European Union, have done and that he had “significant conversations” about this very subject just last week at the G7 summit in Italy.

Freeland also discussed the issue of Chinese EV oversupply with her U.S. counterpart, Treasury Secretary Janet Yellen, during a brief visit to Washington, D.C., on Monday.

Trudeau said the government will continue to protect Canadian workers and industry and that it will “look very carefully at what steps need to be taken to ensure that the Canadian auto industry and indeed Canadian consumers are well-supported for years to come.”

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said his organization has been lobbying for these tariffs since last fall and he is getting “very real indications” that the government will respond “imminently.”

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“Four out of every five vehicles made in Canada get sold in the U.S. So, what the Americans did, essentially, was protect the consumer market for Canadian manufacturers, and I think we have an obligation, as their main partner in North America, to do the same for them,” he said. “We certainly can’t leave the back door open.”

NDP critic for industry Brian Masse said his party is also supporting calls for tariffs on Chinese-made EVs, adding that “Canadian workers must be at the forefront of our electric vehicle strategy.”

A government source, speaking on background because they were not authorized to discuss it publicly, said that the number one threat to Canada is not the flow of Chinese-made inexpensive EVs but rather becoming a “dumping ground” for the U.S.

With the U.S. tariffs kicking in Aug. 1, that means Canada will at least need to “align the outcomes” of the punitive measures set by its biggest economic partner, the source said.

The European Commission also said it will impose levies up to 48 per cent on imported Chinese EVs as of July. On Monday, China said it was opening an anti-dumping investigation into pork exports from Europe. While Beijing did not specifically mention EV tariffs, the move is widely seen as direct trade retaliation to Europe’s measures.

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The threat of a trade war explains why Canada, which saw its canola and pork exports halted by China following Canada’s arrest of Huawei executive Meng Wanzhou in 2018, is taking such a careful and “measured approach” to EV tariffs, said the source.

There are two schools of thought as to how this might play out, said the source.

With the U.S. and Europe moving ahead with their tariffs, Canada may be a low priority for China in terms of retaliation. But with Canada being a middle power, China might want to make an example out of the country to prevent others from following suit.

Volpe said the internal debate in cabinet between environment and industry is probably “one of the big stumbling blocks” for the Liberals.

“You’ve got the industry minister who successfully chased down a generational amount of investment in the space, and then you’ve got an environment minister who is ideologically married to unachievable EV sales targets in this country, and the only way to achieve his ideological rainbow is to rely on cheap Chinese EVs,” he said.

“That’s probably the bigger debate internally to government than anything about being afraid of the Chinese,” he added.

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In any case, Volpe said the government should make its position known sooner rather than later.

“The clock is ticking. We wait. I know they’re going to do the right thing, but they shouldn’t leave too much daylight between their moment and the American moment of when these tariffs are enforced.”

National Post
calevesque@postmedia.com

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