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Justin Trudeau considers new tariffs on Chinese EVs to align with US and EU

Published 2024-06-21, 06:57 a/m
Justin Trudeau considers new tariffs on Chinese EVs to align with US and EU

Prime Minister Justin Trudeau’s government is preparing potential new tariffs on Chinese-made electric vehicles (EVs) to align Canada with actions taken by the United States and the European Union, according to sources.

While no final decision has been made, it is expected that public consultations on the proposed tariffs will be announced soon.

These measures aim to counter the influx of Chinese EVs into Canada and support the domestic auto industry.

Rising pressure to match international tariffs

Trudeau has been under increasing pressure to follow the lead of US President Joe Biden, whose administration announced plans in May to nearly quadruple tariffs on Chinese-manufactured EVs, up to 102.5%.

Similarly, the European Union plans to increase tariffs on Chinese EVs, potentially reaching 48% on some vehicles.

Western democracies are concerned about China’s overproduction of key goods, viewing it as an effort to dominate supply chains and undercut local industries.

Concerns over Chinese EV imports

The number of cars arriving from China at the port of Vancouver rose significantly last year, to around 44,400, largely due to Tesla Inc (NASDAQ:TSLA). shipping Model Y vehicles made in Shanghai to Canada.

While the Canadian government’s primary concern isn’t Tesla, there is apprehension about the potential flood of inexpensive EVs from Chinese automakers.

Ontario Premier Doug Ford has criticised China on social media platform X for leveraging low labour standards and less stringent environmental regulations to produce cheaper EVs, urging the federal government to implement tariffs to protect Canadian jobs.

Economic and political implications

Publicly, Trudeau and his ministers have indicated they are monitoring international developments but have not committed to imposing new tariffs.

At the Group of Seven leaders’ summit in Italy, Trudeau discussed concerns about Chinese production with other world leaders.

Finance Minister Chrystia Freeland’s spokesperson noted that Canada is considering measures to counter Chinese oversupply, emphasising the need to protect Canadian jobs and manufacturing.

Canadian auto industry groups have called for stiff tariffs, warning that Canada cannot afford to diverge from US policy, especially with the upcoming review of the United States-Mexico-Canada free trade agreement.

The US and Canada have deeply integrated auto supply chains, with parts and vehicles frequently crossing the border.

The vast majority of Canada’s auto production is exported to the US.

Trudeau has approached the issue cautiously due to the risk of Chinese trade retaliation. Some environmental groups argue that keeping EV costs low is crucial to promoting higher consumer adoption.

Despite these challenges, both Trudeau’s administration and the Ontario government have committed substantial investments to build a domestic EV manufacturing industry, including subsidies for major factories by Volkswagen (ETR:VOWG_p), Stellantis (NYSE:STLA), and Honda.

This article first appeared on Invezz.com

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