Canada’s China EV tariff plan draws debate over best approach

Automotive and environmental groups are at odds over how far Canada should go in imposing new tariffs on Chinese-made electric vehicles as Prime Minister Justin Trudeau’s government weighs levies to protect the domestic industry.

The European Union announced last week that it was increasing tariffs on EVs from China to as much as 48%. That followed a move by the US in May to boost its own such tariffs to as much as 102.5%.

As Canada makes final decisions on its plan, stakeholders are debating whether the country should adopt the more restrictive tariffs of its neighbour to the south or take a softer approach. That discussion is adding a new wrinkle to an effort that’s aimed at preventing cheap Chinese EVs from undercutting the market, while still encouraging consumer adoption of cleaner vehicles.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the industry would like to see Canada materially match the US tariffs.

“Four out of five cars made in Canada are sold in the US, so there’s a reasonable expectation of North American partners that Canada reciprocates," he said in an interview. Still, any new tariffs should be imposed “carefully, with consideration for what the Chinese response might be."

Ontario Premier Doug Ford also called on Canada to match the US tariffs. The provincial government would like to see the federal government use every tool possible to do this, Ontario Economic Development Minister Vic Fedeli said in an interview.

“This is not about our relationship with China," Fedeli said. “This is really all about our relationship with our closest ally, our No. 1 trading partner, the US. And it’s also about protecting the 120,000 good-paying auto jobs in Ontario."

China is Canada’s second-largest trading partner, behind the US. Auto and parts imports from China that year totalled C$6.7 billion ($4.9 billion), according to Statistics Canada. By contrast, Canada is much less important to China, accounting for just 2% of the Asian nation’s trade flows.

While Chinese auto brands don’t currently sell cars in Canada, many of the EVs imported into the country last year were Tesla Inc. models made in Shanghai.

Some environmental groups are sceptical of hiking tariffs due to fears that higher prices will hamper consumer adoption of electric vehicles. Nate Wallace, clean transportation program manager at Environmental Defence, said he’s glad the government will likely do consultations, adding that China’s weak labour standards are a problem. But he still sounded a note of caution.

“Tariffs are maybe a second-best option," Wallace said in an interview. “The first-best option being: How do we do we start to level the playing field between western carmakers and China without raising EV prices?"

If Canada does hike tariffs, Wallace said he prefers the European Union model, rather than the US one.

“We need to have an approach that makes sure we’re protecting wages and jobs in Canada for the auto industry but also doesn’t actually remove that incentive for automakers to innovate and catch up to China, which is what we ultimately want," he said.

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