Canada Considers Surtax on Chinese EV Imports to Protect Domestic Auto Sector

Canada is contemplating a surtax on electric vehicles (EVs) imported from China, with a 30-day consultation set to begin on July 2. Deputy Prime Minister Chrystia Freeland highlighted concerns over China's deliberate strategy to create a global oversupply, echoing similar actions by the United States and the European Commission, who plan to increase tariffs on Chinese EVs this summer.

Freeland emphasized the impact on Canada's automotive sector, which employs nearly 550,000 people. "Canadian workers and the auto sector are facing unfair competition from China's intentional state-directed policy of overcapacity that is undermining Canada's EV sector's ability to compete in domestic and global markets," she said. The consultation aims to gather input on factors driving China's EV export surge, including market practices and labor and environmental standards.

Potential Changes in Federal EV Purchase Rebate

The consultation will also explore potential adjustments to the eligibility criteria for Canada's federal EV purchase rebate, which offers up to $5,000 Canadian ($3,661) per vehicle. Additionally, it will consider expanding investment restrictions within Canada. Currently, Tesla's Shanghai factory is the sole source of Chinese-made EVs imported into Canada, with no Chinese-branded EVs being sold or imported at present.

Freeland emphasized that Canada will coordinate its actions with allies in the United States and the European Union. She pointed out that North America has an integrated auto sector and assured that her government would prevent Canada from becoming a dumping ground for Chinese oversupply. "Our automotive sector supports nearly 550,000 good-paying Canadian jobs," she said.

Concerns Over Unfair Competition

U.S. President Joe Biden has criticized Chinese government subsidies for EVs and other consumer goods, arguing that these subsidies allow Chinese companies to avoid making a profit, giving them an unfair advantage in global trade. Freeland echoed these concerns, noting that Canada's move aligns with broader international efforts to address these issues.

The consultation will seek public input on various aspects of China's EV export practices, including whether these practices involve unfair market tactics or fail to meet acceptable labor and environmental standards. The outcome could influence future policy decisions regarding import tariffs and investment restrictions.

Canada's decision to investigate potential surtaxes on Chinese-made EVs reflects growing international scrutiny of China's trade practices. By aligning with its allies, Canada aims to protect its domestic automotive industry from unfair competition while ensuring a level playing field in the global market.

The consultation period will provide an opportunity for stakeholders to voice their opinions and contribute to shaping Canada's approach to this issue. The government's final decision will likely have significant implications for both domestic and international trade dynamics in the EV sector.

Stakeholders are encouraged to participate actively in the consultation process to ensure their perspectives are considered in shaping Canada's policy response. This initiative marks a significant step in addressing concerns over China's role in the global EV market. By engaging with stakeholders and allies, Canada aims to develop a comprehensive strategy that balances domestic interests with international trade obligations.