The public consultations, starting this week, will determine if Canada will impose tariffs on imports of Chinese-made passenger EVs

The Canadian government is opening a 30-day consultation period to gather public opinion on imposing tariffs on Chinese-made EV imports.

There is growing concern over Chinese EVs flooding the North American and Canadian markets.

“This consultation will consider what action we can take to protect our workers, level the playing field, and prevent transshipment or oversupply from China’s anti-competitive practices,” says Chrystia Freeland, deputy prime minister and minister of finance, in a press statement.

Recently other markets are taking action against Chinese EV imports through tariffs.

Last month, the United States moved to impose a 100 per cent tariff on Chinese-made passenger EVs. The new duty comes into effect on August 1.

Additionally, the European Commission, which oversees trade policy for 27 nations, has imposed provisional countervailing duties of up to 38.1 per cent on Chinese-made EVs, set to begin on July 4. The European Commission will determine final duties in the fall.

Now, Canada is considering whether to follow suit.

“Chinese producers are generating a global oversupply that will erode the profit incentives of EV producers around the world, including in Canada,” says the federal government.

The federal government has identified several of China’s trade practices that it deems unfair. These include weak standards across EV supply chains, such as labour concerns, a lack of environmental protections and trade policies that support oversupply.

The consultation period will be open for a month, closing on August 1, 2024.

Key points of the consultation

Canada is considering a surtax on passenger EVs manufactured in China under Section 53 of the Customs Tariff. This section allows additional duties to be imposed on goods to counteract practices that might adversely affect Canadian industries.

Currently, there are no Chinese-branded passenger EVs sold in Canada apart from Teslas manufactured at the automaker’s Shanghai factory and Polestars. These Teslas are subject to a six per cent Canadian customs tariff, but qualify for the federal Incentives for Zero-Emission Vehicles (iZEV) purchase rebate.

The consultations will also explore additional measures. These include potential modifications to the iZEV purchase rebate eligibility criteria and putting in place investment restrictions.

Additionally, the consultations will address cyber and data security concerns, emphasizing the protection of Canadians’ privacy and national security. The government is highlighting significant risks posed by connected vehicles containing technology from China that collects driver information with little transparency regarding data ownership.

Canada’s EV industry

The concern over a flood of cheaper Chinese cars comes as Canada is intent on developing its EV industry.

Over four years, Canada has made massive investments in its auto sector. It has also attracted billion of dollars in investments to solidify its position as a global leader in the EV supply chain.

“Canada has a proud auto manufacturing history, one that has supported generations of workers, and built communities. As the world moves to reduce pollution and keep our air clean, we have attracted historic investments in building EV manufacturing capacity here in Canada,” says François-Philippe Champagne, minister of innovation, science and industry.

“By launching this consultation [we] make sure we continue to strengthen our domestic supply chains and bolster access to critical commodities.” 

As well as considering tariffs on Chinese imported passenger EVs, this year the federal government announced in Budget 2024 that it will introduce a new 10 per cent EV Supply Chain Investment Tax Credit.

This credit aims to attract investment across EV assembly, battery production and cathode active material production supply chain segments.