By David Ljunggren and Ismail Shakil
OTTAWA (Reuters) -Canada said on Monday it was considering whether to impose tariffs on China-made electric vehicles as it seeks to align itself with allies against what they see as a heavily subsidized Chinese industry.
Finance Minister Chrystia Freeland said the domestic auto sector faced unfair competition from China's "state-directed policy of overcapacity." Ottawa will open a 30-day public consultation period on July 2 on possible responses.
"Chinese producers are quite intentionally generating a global oversupply that undermines EV producers around the world, including here in Canada," Freeland told reporters in Vaughan, Ontario, echoing concerns raised by the United States and the European Union.
Freeland, noting a recent crackdown by the European Union and the United States, said the response could include a tariff on imports. She declined to detail what Ottawa's potential action would be, or if EV components like batteries could also be targeted.
"We're not ruling anything out," she said, adding "we are bringing to bear our strongest trade action tools."
U.S. President Joe Biden last month unveiled steep tariff increases on Chinese imports, including EVs. The European Commission plans to impose additional duties of up to 38.1% on Chinese producers such as BYD, Geely and SAIC, as well as Chinese-built Tesla (NASDAQ:TSLA) and BMW cars.
China rejects accusations of unfair subsidies or that it has an over capacity problem, saying the development of its EV industry has been the result of advantages in technology, market and industry supply chains.
An opinion piece in the Chinese state-backed Global Times newspaper ahead of Freeland's announcement advocated for "Canada to remain strategically rational" and not "sacrifice normal economic exchanges with China for the sake of Washington's strategic selfishness."
China is Canada's second-largest trading partner, although it trails far behind the United States. Data from Canada's largest port in Vancouver show imports of automobiles from China at the port jumped 460% annually in 2023, when Tesla started shipping Shanghai-made EVs to Canada.
Ottawa, trying to position Canada as a critical part of the global EV supply chain, has come under pressure domestically to act against Chinese EVs.
The premier of Ontario, Canada's most populous province and the main auto-making center, last week urged Ottawa to impose tariffs of at least 100% on the vehicles.
Canada has inked deals worth billions of dollars to woo companies involved in all parts of the EV supply chain to bolster its manufacturing heartland.
The CEO of Canadian firm Northern Graphite, Hugues Jacquemin, said any potential action limited to EVs would not be enough and Ottawa should also include critical minerals essential for battery production.
The main opposition Conservative party, accusing Trudeau of failing to protect the auto industry, said Ottawa should not allow the dumping of cheap Chinese products.
Industry bodies, including the Global Automakers of Canada and the Canadian Vehicle Manufacturers' Association, welcomed the announcement.