Canada considers blocking Chinese investment in new factories to curb electric vehicles

Prime Minister Justin Trudeau’s government has released options it will consider to deter Chinese-made electric vehicles from entering the Canadian market, including imposing tariffs on imports and blocking Chinese investment in new Canadian factories.

The Trudeau government appears to be considering tariffs only on finished vehicles, according to the document released Tuesday. The list of items likely to be hit with tariffs does not include batteries or battery components, for example.

The document was released as part of formal consultations Canada must conduct before imposing tariffs. The consultations, announced by Finance Minister Chrystia Freeland last week, will seek input from stakeholders, including unions and auto industry groups, and will run until Aug. 1.

The Canadian electric vehicle industry “risks being undermined by the recent and significant increase in Chinese electric vehicle exports to Canadian and global markets, enabled by unfair support provided by China through the use of a wide range of non-trade policies and practices,” the consultation paper says.

Chinese policies include “widespread subsidies, including on supply chains of necessary components, problematic or non-existent labor and environmental standards, and other measures aimed at artificially reducing production costs, leading to significant overcapacity in Chinese electric vehicle production,” the document said.

The paper does not provide potential tariffs, but rather asks for comments on what they might be for different vehicle classes. It also seeks comments on how tariffs might affect the affordability of electric vehicles in general.

In another section, the document considers the possibility that “Chinese companies may seek to establish facilities to manufacture electric vehicles in Canada” in an effort to “access the North American market in light of potential tariff measures.”

The document seeks comment on the need for “additional measures, such as additional policy guidance, oversight or restrictions related to transactions and investments from Chinese sources in the Canadian electric vehicle supply chain.”

02:03

Electric vehicles made in China face additional import duties in the EU of up to 38%

Two other areas are being raised for comment. The first concerns whether Canada should make Chinese-made electric vehicles ineligible for federal consumer incentives. The second concerns data privacy and security considerations for connected vehicles and related infrastructure.

In considering tariffs and other measures, Canada is following in the footsteps of its allies. The United States this spring unveiled plans to quadruple U.S. tariffs on Chinese-made electric vehicles, to a final rate of 102.5%. The European Union is also planning to increase tariffs, bringing them to 48% on some vehicles.

Although the value of Chinese electric vehicles imported into Canada has increased recently, there has been little activity involving Chinese automakers so far.

The vast majority of electric vehicles imported into Canada from China are Tesla Inc. vehicles produced at its Shanghai plant. Freeland declined to comment on whether tariffs could apply to those vehicles.