Canada to begin 30-day consultation to impose surcharge on Chinese electric vehicles

OTTAWA — Canada accused China of undermining global trade rules and flooding the market with electric vehicles Monday as Finance Minister Chrystia Freeland launched the process needed to impose new import taxes on electric vehicles made in China.

The move comes weeks after the United States and the European Commission decided to impose their own new import tariffs on Chinese electric vehicles, citing unfair subsidies aimed at replacing more expensive vehicles made in Europe and America North.

Speaking at an auto parts manufacturing plant in Vaughan, Ontario, Freeland said a 30-day consultation would begin July 2 to investigate China’s unfair trade practices related to electric vehicles.

But it seems clear that Freeland believes she already has the evidence she needs.

“China intentionally created overcapacity and oversupply and exported it to other countries,” she said. “This does not respect the rules of global trade and Canada will not tolerate this. »

Canada has made massive investments in its automotive sector over the past four years in an effort to solidify Canada’s position as a global leader in the electric vehicle supply chain.

Since October 2020, the companies have pledged $46 billion in investments in 13 different electric vehicle factories, battery factories and battery precursor production sites. Canada and the provinces are offering up to $53 billion for these projects, including in the form of tax credits, production subsidies and capital investments.

Canada is also working closely with the United States to try to counter China’s dominance in electric vehicles and other clean technologies.

These efforts allowed Canada to take first place, ahead of China, for the first time this year in the annual Bloomberg NEF ranking of the potential of countries in the lithium-ion battery supply chain.

Canada’s tariff investigation is being launched under section 53 of the Customs Tariff Act, which allows for the imposition of a surtax on imported goods in response to practices that harm Canadian industry.

This is the same item used in 2018 when Canada imposed a retaliatory surcharge on aluminum and steel products imported from the United States after then-President Donald Trump imposed new import tariffs on Canadian aluminum and steel.

Freeland said she is “not ruling anything out” of a potential response, including extending a surcharge beyond just electric vehicles to other components of the electric vehicle supply chain, such as as batteries and their precursors.

The consultation will examine not only the economic damage caused to Canada, but also the risks to national security as well as environmental, labor and human rights standards.

“I think there are good reasons to say that China is falling short in these areas,” she said.

In addition to a surtax on imports, the consultation will assess additional investment restrictions and determine whether Canada should make any changes to vehicles eligible for the federal electric vehicle rebate.

The rebate currently stands at $5,000 for electric vehicles up to a certain price point.

Currently, the only Chinese-made electric vehicles imported into Canada are from American tech giant Tesla, manufactured at the company’s Shanghai factory. No Chinese brand electric vehicles are sold or imported here at the moment.

Teslas are subject to a 6 percent import duty, currently the rate that would be applied to all vehicles made in China, but most models are eligible for the $5,000 rebate.

Canada’s automakers and auto unions have expressed concerns about the potential for an influx of cheap Chinese cars as the country has become the dominant player in the electric vehicle industry. global scale.

Unifor President Lana Payne on Monday welcomed the Canadian decision alongside Freeland.

“A wave of low-cost electric vehicle imports from China will undermine everything currently being done to rebuild and grow a strong, truly domestic auto industry,” Payne said.

David Adams, president of Global Automakers of Canada, said in a statement Monday that he also supports the decision. “It is important that the Government of Canada provides a level playing field for the sector and we look forward to participating in the consultation process.

Conservative trade critic Kyle Seeback said in a statement that protecting the jobs of Canadian workers was his party’s priority. “Canada should not allow the dumping of cheap Chinese products into our country that threaten Canadian manufacturing jobs. »

Seeback also raised concerns about Canada’s subsidies for electric vehicle battery factories, allowing foreign workers to displace Canadians.

About 70 percent of electric vehicle batteries and 60 percent of electric vehicles are now made in China.

The European Commission launched an anti-subsidy investigation into Chinese electric vehicles last fall after China’s market share in Europe rose from less than 1 percent to more than 8 percent in less than four years.

Europe announced about two weeks ago plans to impose a surcharge of between 17 and 38 percent on Chinese imports, starting July 4, on top of existing customs duties of 10 percent. could modify or delay this decision.

China has threatened to retaliate against European products if the surcharge is implemented as planned.

US President Joe Biden said in mid-May that the import tax on Chinese electric vehicles would quadruple to 100 percent, with the import tax on electric vehicle batteries rising from 7.5 percent at 25 percent. Both increases are planned for August.

This report by The Canadian Press was first published June 24, 2024.

— With files from Maan Alhmidi in Vaughan, Ontario.

Mia Rabson, The Canadian Press