Canada Imposes 100 Percent Tariffs On Chinese EVs

China-based electric vehicle (EV) manufacturers have been handed more bad news, as access to another Western market has been been effectively closed down.

The Canadian government announced that from 1 October it will implement a 100 percent tariff on all Chinese-made EVs. This is on top of the import tariff of 6.1 percent that currently applies to EVs produced in China and imported into Canada.

The move is to protect Canada’s 125,000 jobs in the auto manufacturing industry, and in addition the Canadian goverment said that from 15 October it would implement a 25 percent tariff on imported Chinese steel to protect the 130,000 jobs in Canada’s steel and aluminium sectors.

EV, Steel tariffs

The Canadian government said that local “auto workers and the auto sector currently face unfair competition from Chinese producers, who benefit from unfair, non-market policies and practices. China’s intentional, state-directed policy of overcapacity and lack of rigorous labour and environmental standards threaten workers and businesses in the EV industry around the world and undermine Canada’s long term economic prosperity.”

It said that recent consultations with stakeholders have confirmed that exceptional measures are required to address this extraordinary threat.

The 100 percent surtax on all Chinese-made EVs “includes electric and certain hybrid passenger automobiles, trucks, buses, and delivery vans.”

The Government of Canada also said it will launch a second 30-day consultation concerning other sectors critical to Canada’s future prosperity, including batteries and battery parts, semiconductors, solar products, and critical minerals.

And the Canada government announced its intention to limit eligibility incentives to transportation products made in countries which have negotiated free trade agreements with Canada.

“Canada is home to the talented workers, raw materials, clean electricity, and specialised production capabilities needed to build electric vehicles, and that is why our EV supply chain potential is ranked first in the world,” said the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance.

“Canadian workers and critical sectors, including steel and aluminum, however, are facing an intentional, state-directed policy of overcapacity, undermining the Canada’s ability to compete in domestic and global markets,” said Freeland. “That is why our government is moving forward with decisive action to level the playing field, protect Canadian workers, and match measures taken by key trading partners.”

Canada’s tariffs on Chinese EVs will include those made by Tesla at its Shanghai factory, which resulted in Tesla’s share price closing on Monday 3.2 percent down.

China’s response

A spokesperson for China’s Commerce Ministry was quoted by Reuters on Tuesday as saying that Canada’s move “will disrupt the stability of global industrial and supply chains,” and seriously undermine the global economic system and economic and trade rules.

“The Canadian side claims to support free trade and the multilateral trading system based on World Trade Organization (WTO) rules, but it flagrantly violates WTO rules, blindly follows individual countries, and announces that it will adopt unilateral tariff measures, which is typical trade protectionism,” the spokesperson was quoted as saying in a statement.

The action also seriously impacts China-Canada economic and trade relations, and damages the interests of enterprises of the two countries, the spokesperson added.

China is Canada’s second-largest trading partner, although it trails far behind the United States.

Earlier this month the Chinese government launched a challenge at the World Trade Organisation against EU tariffs.

Western tariffs

Canada is not alone in implementing punishing tariffs on Chinese EVs, as other important Western markets have also been closed down to Chinese EV imports.

The Biden Administration and the US Commerce Department in May had announced new tariffs of up to 100 percent on a number of Chinese goods, including EVs, which they said were designed “to protect American workers and businesses from China’s unfair trade practices.”

The US also implemented a 25 percent tariff on Chinese steel and aluminium: and increased tariffs on Chinese semiconductors; batteries, battery components, critical minerals; solar cells; ship-to-shore cranes; and certain medical products.

Implementation of the US tariffs has been delayed until September.

The European Union followed suite and in June said it would institute higher EV tariffs of up to 37.6 percent on Chinese imports while it completed its investigation into allegedly excessive and unfair subsidies from Beijing. This is on top of a 10 percent duty that was already in place for all electric cars imported from China.

The European Union’s draft higher tariffs on certain Chinese EV manufacturers kicked in on Thursday 4 July 2024.

However the EU later agreed to a lower tariff of 9 percent for Tesla EVs made in China.

The UK remains the odd man out at the moment, by seeming to stick to its existing 10 percent import tariff on Chinese EVs.