Canada's Potential Tariffs on Chinese EVs Raise Concerns Over Trade Tensions

The Canadian government should avoid escalating trade tensions with China over electric vehicles (EVs), Chinese analysts advised after Ottawa released a document on Tuesday outlining possible tariffs on Chinese EVs.

The document, part of a 30-day consultation process, proposes measures to prevent Chinese-made EVs from "unfairly" entering the Canadian market. These measures include imposing tariffs on imports and blocking Chinese investment in Canadian factories.

The consultation paper argues that Canada's EV industry is "at risk of being undermined by the significant recent increase in exports of Chinese EVs to Canada," attributed to "unfair support through China's use of a broad range of non-market policies and practices." It cites issues such as Chinese subsidies, supply chain advantages, labor and environmental practices, and artificially lowered production costs leading to overcapacity in Chinese EV production.

Chinese analysts criticized the document as unsubstantiated and reminiscent of US policies. They warned that such actions could damage trade relations and economic cooperation between China and Canada, leading to a lose-lose scenario.

"China and Canada share a commitment to combating climate change with advanced technologies and new transportation methods. Cooperation is in the best interest of both nations," said Lü Xiang, a research fellow at the Chinese Academy of Social Sciences. He cautioned that following the US's lead in complicating trade relations could be detrimental.

Lü emphasized that there is no direct competition between the two countries in the EV sector, as Canada lacks significant EV brands. He suggested that Chinese companies would welcome collaboration if Canadian companies engaged competitively in the global EV industry and supply chain.

The Canadian government's document does not specify potential tariff rates, seeking public input before making any decisions. Chinese analysts believe that Ottawa is gauging public opinion to avoid backlash from a hasty decision.

This move by Canada follows the US decision in May to nearly quadruple tariffs on Chinese-manufactured EVs to a final rate of 102.5 percent. The EU is also expected to announce its tariff policy on Chinese EVs soon, despite opposition from some EU countries and industries.

Chinese observers highlighted the importance of preserving the recovery in bilateral trade and economic cooperation, which had suffered after the detention of Huawei executive Meng Wanzhou by Canadian authorities over five years ago. Trade between China and Canada grew by 9.7 percent in the first five months of 2024, reaching 271.17 billion yuan ($37.28 billion), with Canada's exports to China increasing by 14.4 percent year-on-year, according to Chinese customs data.