Finance Minister Chrystia Freeland is expected to announce plans for potential tariffs this morning to protect Canada’s electric vehicle supply chain from unfair competition from China.
Foreign Minister Freeland and International Trade Minister Mary Ng will make the joint announcement on Monday morning after both the United States and European countries moved to increase import tariffs on Chinese-made EVs this spring.
An anti-subsidy investigation by the Canadian International Trade Tribunal must be completed before Canada can impose new tariffs.
Currently, the only Chinese-made EVs imported into Canada are Teslas made at the U.S. tech giant’s Shanghai factory.
China has become a bigger player for Canada when it comes to EV batteries and battery components, an industry in which Canada has invested heavily over the past four years.
In 2021, about 80% of the world’s lithium-ion batteries for electric vehicles were shipped from China, and according to the International Energy Agency, about 60% of global electric vehicle sales are now made in China.
Both Europe and the United States retaliated this spring after China was accused of stimulating its domestic EV industry through unfair subsidies.
Many Chinese-made EVs are cheaper than European ones
U.S. President Joe Biden announced in mid-May that he would raise tariffs on Chinese-made EVs from 25% to 100% this year, but only one Chinese-made EV is currently available in the United States.
Biden also announced higher tariffs on other clean energy products, including lithium-ion batteries and solar cells.
The European Commission has yet to complete its anti-subsidy investigation, but two weeks ago it announced it would impose provisional tariffs of 17-38% on Chinese-made EVs from July 4th.
This plan may be subject to change as both Europe and China agreed to negotiate on the matter over the weekend.
Chinese-branded EVs now account for 8% of the European market, up from 1% in 2019. Europe says a preliminary investigation has confirmed that Chinese-made EVs benefit from “unfair subsidies”.
Many Chinese-made EVs are significantly cheaper than similar European models.
Details of Canada’s plan are being finalized
What tariffs Canada decides on will depend on a consultation process. A government source told The Canadian Press on condition of not being named because they were not authorized to speak publicly that there is typically a short consultation period before exact tariffs are imposed.
Prime Minister Justin Trudeau has repeatedly said since the U.S. announcement that Canada is closely monitoring the situation and assessing its next steps.
On June 12, the day the European Commission announced the interim tariffs, Ng told reporters on Parliament Hill that Canada was working on its own plan.
“As it stands, we are working through this issue. I’ve been very clear about this,” she said. “This is something we’re concerned about.”
Ng said at the time that he was already in discussions with Canadian industry.
The process of initiating an anti-subsidy investigation typically begins with a complaint from industry.
“We have made significant investments in the electric vehicle supply chain,” she said.
Canada has attracted more than $46 billion in investment into 13 electric vehicle, battery and battery component manufacturing projects since 2020. Ottawa and the provinces have jointly pledged up to $53 billion in rewards in tax credits, production subsidies and capital investment.