Should Canada Reconsider Tariffs on Chinese EVs?
Canada’s trade relations with the United States are prompting a reevaluation of the country’s 100% tariff on electric vehicles (EVs) imported from China. Some economists argue that easing or lifting these tariffs could boost EV adoption, potentially impacting the market dominance of Tesla, while others maintain that the tariffs are essential to shield Canada’s nascent EV industry. The issue is further complicated by retaliatory tariffs from China, adding pressure on Canadian farmers.
Canada mirrored the U.S. last fall by imposing tariffs on Chinese EVs, alongside a 25% surtax on Chinese steel and aluminum imports. The situation intensified following the implementation of tariffs by the U.S. on Canadian goods.
The Economic Debate
Julian Karaguesian, an economist and lecturer at McGill University, suggests it’s time to reassess the tariffs on Chinese EVs. “I do think quietly, we’re thinking about easing some of those measures. And I actually think we should,” he stated, proposing that removing the tariffs could be a targeted response to the U.S. administration’s policies. Karaguesian also believes that Canada could strengthen its EV sector by inviting manufacturers from India and China, alongside those from the U.S. and Europe, to establish factories in Canada.
Concerns and Counterarguments
Automakers, conversely, are firm in their support for the existing tariffs on Chinese EVs, stating that the tariffs protect Canada’s emerging EV industry. Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, emphasized that the challenge posed by U.S. tariffs has only strengthened the case for the tariffs on Chinese EVs because U.S. tariffs increase costs and threaten Canadian auto industry jobs.
David Adams, president and CEO of Global Automakers of Canada, argues that opening the doors to Chinese EVs would undermine the investments Canada has made in the sector, as Chinese vehicles could dominate the market. He notes that the U.S. tariffs complicate the situation but do not negate the original rationale behind Canada’s tariffs.
Hugo Cordeau, a PhD candidate in economics at the University of Toronto, raises concerns about potential U.S. retaliation if Canada were to ease tariffs on Chinese EVs. He suggests exploring a “sensible approach” similar to the European Union, which increased its surtax on Chinese EVs while incentivizing Chinese companies to establish factories in Europe.
China’s Retaliation
The tariffs have triggered reciprocal actions from China, which has imposed a 100% tariff on Canadian rapeseed oil, oil cakes, and pea imports and a 25% duty on Canadian aquatic products and pork. These measures are causing considerable worry for Canadian farmers.
Sumeet Gulati, a professor at the University of British Columbia, suggests Canada should await a period of stability, around six months, before determining the long-term effects of the trade tensions in the automotive industry. He remarked, “I think we are at this point, unfortunately, pretty much at the mercy of what the U.S. government does.”
