Canada Grapples with Tariffs on Chinese EVs Amid Trade Tensions
Economists are debating whether Canada should reassess its 100% tariff on electric vehicles (EVs) imported from China, given the ongoing trade disputes with the United States. This move, some suggest, could stimulate EV sales and affect the market share of Tesla, led by Elon Musk.
The decision to impose tariffs on Chinese EVs mirrors the U.S. strategy and was initially implemented last fall. Simultaneously, a 25% surtax was placed on Chinese steel and aluminum imports.
A BYD Seagull EV at a showroom in Beijing. Canada’s tariffs have ignited debate.
However, automakers are concerned that removing these tariffs could hinder the growth of Canada’s emerging EV sector. Furthermore, the imposition of tariffs has led to retaliatory measures from China.
“I do think quietly, we’re thinking about easing some of those measures. And I actually think we should,” stated Julian Karaguesian, an economist at McGill University in Montreal. He further explained that Canada could potentially target the Trump administration’s policies by removing tariffs on Chinese EVs instead of impacting Tesla or U.S.-made EVs directly.
A Tesla dealership in Toronto.
BYD, a Chinese automaker, introduced its Seagull EV, priced around $14,600 CAD. In contrast, the most affordable EVs in Canada start at approximately $40,000.
Retaliatory actions from China include imposing 100% tariffs on Canadian rapeseed oil, oil cakes, and pea imports, as well as a 25% duty on aquatic products and pork, significantly impacting Canadian farmers.
Karaguesian suggested that Canada could foster its EV market by inviting manufacturers from various countries, including India and China, to establish factories in Canada. He argues that Canada’s stance against China has been primarily to appease the U.S.
Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, supports the tariffs on Chinese EVs, highlighting that U.S. tariffs have amplified the need for these measures to protect jobs and consumer costs within Canada’s auto industry. He highlighted over $46 billion in EV investments since 2020, as per a June 2024 report by the Office of the Parliamentary Budget Officer. Kingston believes that allowing Chinese EVs unrestricted market access could jeopardize these investments and hinder the industry’s overall development.
Ontario Premier Doug Ford and then-Prime Minister Justin Trudeau at Honda’s plant in Ontario.
Kingston is confident that Canada can produce competitive EVs, given time to adjust to China’s market presence. David Adams, president and CEO of Global Automakers of Canada, concurs that opening the market to Chinese EVs now would undermine existing sector investments. Hugo Cordeau, a University of Toronto economics PhD candidate, suggests that the European Union’s approach of increasing surtaxes up to 45% while encouraging Chinese firms to establish factories in Europe could be a more balanced measure. He believes that aligning with the EU’s strategy could be a viable option without completely eliminating the tariffs.
Sumeet Gulati, a professor at the University of British Columbia, notes that introducing more affordable Chinese vehicles could encourage greater adoption of EVs in Canada by expanding the charging infrastructure. He recognizes that Canada’s integrated automobile industry makes the decision, despite the challenges, a complex issue.
For now, Gulati advises Canada to wait approximately six months for the trade tensions to stabilize before determining if a decoupling of the Canadian and U.S. auto industries is necessary.
