Canada imposes 100% tariffs on EVs from China including Teslas

Canada will impose new tariffs on Chinese-made electric vehicles, aluminum and steel, lining up behind western allies and taking steps to protect domestic manufacturers.

The government announced a 100 percent levy on electric cars and 25 percent on steel and aluminum.

The tariffs bring Canada in line with the U.S. and the European Union.

"I think we all know that China is not playing by the same rules," Prime Minister Justin Trudeau said while unveiling the tariffs on Aug. 26 in Halifax, Nova Scotia.

The value of Chinese electric vehicles imported by Canada surged to C$2.2 billion ($1.6 billion) last year, from less than C$100 million in 2022, according to data from Statistics Canada. The number of cars arriving from China at the port of Vancouver jumped after Tesla started shipping Model Y vehicles there from its Shanghai factory.

However, the Canadian government’s main concern is not Tesla, but the prospect of cheap cars made by Chinese automakers eventually becoming available.

BYD informed the Canadian government in July that it intends to lobby lawmakers and officials about its plans to enter the country.

The surtax on electric vehicles will take effect Oct. 1 and will also include certain hybrid passenger automobiles, trucks, buses and delivery vans. It will be added to an existing 6.1 percent tariff that applies to Chinese EVs.

The levies on aluminum and steel will come into place Oct. 15. The government released an initial list of goods on Monday and the public will have a chance to comment before it is finalized on Oct. 1.

U.S. trade

Canada, an export-driven economy that relies heavily on trade with the U.S., has been closely watching moves by the Biden administration to erect a much higher tariff wall against Chinese EVs, batteries, solar cells, steel and other products.

Canada’s auto sector is heavily integrated with that of its closest neighbor: The vast majority of its light vehicle production — which was 1.5 million units last year — is exported to the U.S.

Finance Minister Chrystia Freeland, the most powerful person in Trudeau’s cabinet, has been one of the most prominent voices in favor of a harder approach to Chinese vehicle exports, and becoming a closer trade ally with the U.S.

In June, she announced a public consultation on possible measures to make it more difficult for Chinese companies to sell electric vehicles in the Canadian market. The auto industry, she said, is “facing unfair competition from China’s intentional, state-directed policy of overcapacity that is undermining Canada’s EV sector’s ability to compete.”

In July, Freeland went further. During an interview with Bloomberg News, she said the tariffs consultation might go beyond electric cars.

“Geopolitics and geoeconomics is back,” she said at the time. “That means that Western countries— and very much the U.S. — is putting a premium on secure supply chains and is taking a different attitude towards Chinese overcapacity.”

EU tariffs lower

The European Union has also announced proposed new tariffs on electric vehicles important from China, though at lower levels than the U.S. and now Canada are proposing.

Products made by SAIC Motor Corp. face additional duties of 36.3 percent, while Geely Automobile Holdings and BYD each face tariffs of 19.3 percent and 17 percent, respectively, according to a draft decision released by the EU on Aug. 20. Tesla will see an extra 9 percent charge on Chinese-made vehicles.

China has retaliated against Canada before. It previously restricted imports of Canadian canola seed for three years — a move seen as retribution for a decision by Canada authorities to arrest Huawei executive Meng Wanzhou in Vancouver on a U.S. extradition warrant. Meng returned to China in 2021. .

The Canadian auto sector had been pushing him to hike tariffs to protect domestic jobs and wages, arguing that China’s EVs are cheaper due to much weaker labor standards.

The government has also bet big on automakers and manufacturers from democratic allies: the government has agreed to to multibillion-dollar subsidies for electric vehicle plants or battery factories for Stellantis, Volkswagen Group and Honda, among others.  

Steel and aluminum producers in Canada have also publicly and repeatedly urged the government to restrict China’s access, saying that Xi’s industrial policy allows the Asian powerhouse to unfairly flood foreign markets, putting local jobs at risk.

“China does not play by the rules,” Catherine Cobden, president of the Canadian Steel Producers Association, told reporters earlier this month. “Government should be under no illusion that they do.”