Chinese Electric Vehicles In Crosshairs: Canada Follows US, EU; Imposes 100% Tariff

Canada announced on Monday that it would follow the United States’ lead by imposing a 100% tariff on the import of Chinese electric cars. The country also introduced a 25% tariff on imported steel and aluminum from China. Prime Minister Justin Trudeau stated that Ottawa’s actions were aimed at countering what he described as China’s intentional, state-directed policy of overcapacity. However, he did not clarify whether the tariffs would be adjusted or remain the same for Tesla, whose shares fell over 3% on Monday following the announcement.

China not adhering to same rules

Trudeau told reporters that everyone was aware that China was not adhering to the same rules. The tariffs are set to be implemented on October 1 of this year. Trudeau also mentioned, during a three-day closed-door cabinet meeting in Halifax, Nova Scotia, that the significance of these measures lies in their alignment and parallel implementation with other global economies.

Trudeau stated that Ottawa would continue to collaborate with the United States and other allies to ensure that customers worldwide are not unfairly affected by the non-market practices of countries like China. He also mentioned that Ottawa is considering further punitive measures, such as tariffs on chips and solar cells, but did not provide any specifics.

Canada’s tariffs on Chinese electric vehicles will also apply to those produced by Tesla at its Shanghai factory.

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Growing backlash against Chinese EV imports

In May, Joe Biden announced a fourfold increase in tariffs on Chinese electric vehicles to 100%, a doubling of duties on semiconductors and solar cells to 50%, and new 25% tariffs on lithium-ion batteries and other strategic goods, including steel, to protect firms from Chinese overproduction. Earlier this month, the European Union imposed tariffs on imports of electric vehicles. The European Commission announced that it would impose additional duties of up to 38.1% on imported Chinese electric cars starting in July.

Canada is attempting to position itself as a crucial component of the global EV supply chain and has faced pressure from domestic industries to take action against China. China is Canada’s second-largest trading partner, though it significantly trails behind the US. Data from Canada’s largest port in Vancouver indicates that imports of automobiles from China at the port increased by 460% annually in 2023 when Tesla began shipping Shanghai-made EVs to Canada.

China reacts, calls it “trade protectionism”

China has described the move as “trade protectionism” that “violates World Trade Organization rules.” A statement from China’s embassy in Canada explained that the rapid growth of China’s electric vehicle industry is due to persistent technological innovation, well-established industrial and supply chains, and robust market competition. The statement also noted that China’s competitiveness comes from utilizing its comparative advantages and adhering to market principles, rather than relying on government subsidies.

In April, Beijing enacted a law to enhance its capacity to respond to the U.S. or EU tariffs on exports from the world’s second-largest economy. It has also initiated an anti-dumping investigation into brandy imports, primarily from France.

China’s electric vehicle exports in decline

New data released in July revealed that China’s electric vehicle exports fell by 13.2% from the previous month in June, totaling 86,000 vehicles. This decline signals increased resistance to the vehicles as Europe introduces higher trade barriers. This drop represents the third consecutive monthly decrease since March, as reported by the China Association of Automobile Manufacturers. The group’s data also indicated a slight growth rate of 0.7% in total automobile shipments for June compared to the prior month.

Before these tarrifs, China’s total battery electric vehicle (BEV) exports increased by 70 percent in 2023, reaching $34.1 billion. The European Union (EU) was the largest recipient of Chinese BEV exports, representing nearly 40 percent of the total. Other European countries, including Albania, European Free Trade Association members, North Macedonia, Ukraine, and the United Kingdom, accounted for a 15 percent share of Chinese shipments during the same year.

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