Canada takes step toward boosting tariff regime on Chinese EVs by announcing consultation

The federal government took a step Monday toward making Chinese electric vehicle imports more expensive in Canadaby announcing a 30-day consultation period to examine Beijing's trade practices in the EV sector.

Deputy Prime Minister and Finance Minister Chrystia Freeland made the announcement in Vaughan, Ont.She saidthat the consultations, which beginJuly 2, will help the government craft its response to Beijing.

"Canadian auto workers, and the auto sector are facing unfair competition from China's intentional, state-directedpolicy of overcapacity that is undermining Canada's EV sector's ability to compete in domestic and global markets," Freeland said.

Freeland said China's oversupply of electric vehicles cannot be absorbed by the Chinese market andis being shipped abroad, where it "undermines EV producers around the world."

"We are living in a world right now where China is taking advantage of the global economic system," Freeland said. "We know we need to defend our national interest and we will."

Freelanddidnot hint athowCanada willrespond, saying only that she will wait to announce possible trade measures against China until after the consultation period is over.

"Nothing is ruled out and all possible tools are on the table," she said. "That includes the use of Section 53 It grants very strong and very broad powers to the finance minister to act."

Currently, the only Chinese-made EVs imported into Canada are Teslas made at the U.S. tech giant's Shanghai factory. Chinese-built vehicles currently face tariffsbut under Section 53 of the Customs tarifflaw, Freeland could impose a surtax on top of tariffs.

The consultation will also look atadjusting federal Incentives for zero-emission vehicles, such as the rebates of up to $5,000 available to Canadians who buy or lease an EV.

Environmental and labour standards.

Freeland said China's EV overcapacityis being created with "very problematic labour standards [and] very problematic environmental standards."

"In our trading relationships, Canada attaches very high importance to high labour standards, to high human rights standards, to high environmental standards and that is going to be a set of issues that we consider carefully," she said.

Freeland also said that the consultations will look for possible threats to cyber security and data security and will considerpossible foreign investment restrictions.

Conservative trade critic Kyle Seeback said the Liberal government has so far "failed to protect Canadian auto workers" and has increased the cost of manufacturing by imposing a price on carbon.

"We should work with our close trading partners like the United States, so we can protect Canadian jobs and stand for up the working people of our country," Seeback said in a mediastatement.

The NDP's industry critic Brian Masse welcomed the news.

"It's a relief to see this government finally step up and start working toward securing a plan to protect Canadian auto workers from unfair trade practices," he said.

While China is not the biggest supplier of cars to the Canadian market, it is a big player in Canada on batteries and battery components for EVs industries Canada has invested heavily in over the last four years.

In 2021, almost 80 per cent of all lithium-ion batteries for electric vehicles globally came out of China and the International Energy Agency says almost 60 per cent of global EV sales are now Chinese-made.

Claims that China has spurred its own EV industry through unfair subsidies led both Europe and the U.S. to retaliatethis spring.

Many EVs from China cheaper than Europeanmodels

U.S. President Joe Biden announced in mid-May that he is hiking tariffs on Chinese EVsfrom 25 per cent to 100 per cent this year,though there is only one Chinese EV currently available in the U.S.

Biden also announced a hike in tariffs on lithium-ion batteries and some other clean energy products, including solar cells.

The European Commission is still completing its anti-subsidy investigation but announced two weeks ago that it will impose provisional tariffs of between 17and 38 per cent on Chinese-made EVsstartingJuly 4.

That plan could change; Europe and China agreed to negotiations on the matter over the weekend.

WATCH |Freeland asked about possible Chinese retaliation for potential EV tariffs

Freeland asked about possible Chinese retaliation for potential EV tariffs

3 months ago

Duration 1:30

Asked if she's worried about retaliation from Beijing for potential tariffs on Chinese electric vehicle imports, Finance Minister Chrystia Freeland says China is "taking advantage of the global economic system" by exporting overcapacity and that Canada will act to defend its national interests.

Chinese-madeEVs now make up eight per cent of the European market, up from one per cent in 2019. Europe says its preliminary findings confirmed Chinese EVs are benefiting from "unfair subsidization."

Many Chinese EVs are substantially cheaper than similar European-made models.

Details of Canada's plan being worked out

Where Canada lands on tariffs will depend on the consultation process. A government source, speaking on the condition they not be named because they were not authorized to speak publicly, told The Canadian Press a brief consultation period usually occurs before imposing precise tariffs.

Prime Minister Justin Trudeau has said repeatedly since the U.S. announcement that Canada iswatching the situationvery closely.

On June 12, the day the European Commission announced its provisional tariffs, International Trade Minister Mary Ng told reporters on Parliament Hill that Canada was working on its own plan.

"The status is that we are working on it, and I've been very clear about this," she said. "This issue is one that we're concerned about."

Ng said she was already talking to representatives of the Canadian industry.

Typically, the process for launching an anti-subsidy investigation starts with a complaint from the industry.

"We've invested deeply and heavily in the electric vehicle supply chain," she said.

Since 2020, Canada has attracted more than $46 billion in investments for 13 electric vehicle, battery and battery component manufacturing projects. Ottawa and the provinces have jointly promised up to $53 billion in return, including tax credits, production subsidies and capital investments.