Canada has cast the latest stone in an escalating trade tussle with China, matching the U.S.’s 100 per cent levy on Chinese-made electric vehicles (EVs) and its 25 per cent surtax on steel and aluminum. Both measures will come into effect in October.
“China is not playing by the same rules as other countries,” Canadian Prime Minister Justin Trudeau said Monday during a cabinet retreat in Halifax, N.S. “We’re doing [this] in alignment with other economies around the world that recognize that this is a challenge we’re all facing.”
In May, Washington slapped tariffs on an even wider range of Chinese goods, spanning batteries, critical minerals, semiconductors, and solar cells. On Monday, Canadian Deputy Prime Minister Chrystia Freeland unveiled a 30-day consultation into these same products.
Canada imported C$462 million worth of EVs from China in the first four months of 2024, a nearly 1,300 per cent increase compared to the same period in 2023. This import surge prompted Freeland to pledge in June that Canada wouldn’t become a “dumping ground” for Chinese EVs, which are already subject to a 6.1 per cent levy.
An interwoven Canada-U.S. supply chain, massive investments and subsidies for Canada’s homegrown EV industry (totalling at least C$52.5 billion in provincial and federal support over the past four years), and persistent industry and opposition pressure may have led to Ottawa’s decision on the tariffs, although this week’s measures could be just the tip of the iceberg.
Trudeau acknowledged Monday that “we are looking at further measures,” while Foreign Minister Mélanie Joly hinted there may be more announcements “in the coming weeks.”
Sullivan calls for ‘united front’ on EVs
On his way to Beijing to meet with Chinese Foreign Minister Wang Yi, Biden’s national security adviser, Jake Sullivan, stopped in Halifax to chat with Trudeau and his cabinet. Speaking to reporters, Sullivan said that, when it comes to stemming the flow of Chinese EVs into North America, “a united front, a co-ordinated approach [...] benefits all of us.”
Beijing has so far been relatively restrained in its responses to the blitz of tariffs by the U.S., European Union, and now Canada.
The European Commission recently revised its planned tariffs on Tesla EVs made in China, lowering the rate from 20.8 per cent to nine per cent. Other China-based EV producers will be hit with levies ranging from 17 per cent to 36.3 per cent, pending a final vote by EU members by October 30.
Last week, likely in response to the EU’s looming tariffs, Beijing began an anti-subsidy probe into dairy imports from the 27-member bloc. This latest probe follows two anti-dumping investigations by China into EU pork and brandy announced earlier this year.
Based on past experiences, Canada’s agri-food sector is likely the most vulnerable to possible retaliation by Beijing. Canadian exports to China hit a record-high C$30.5 billion in 2023, with canola seed accounting for nearly 13 per cent of that figure.
China’s subsidies in a league of their own
Following Trudeau’s tariffs announcement, China's embassy in Ottawa registered its “resolute opposition” to the move, accusing Canada of protectionism and arguing that the “rapid development” of China’s EV industry was due to “persistent technological innovation and full market competition.”
Conservative estimates suggest China spends two per cent of its GDP on industrial subsidies — about twice as much as the U.S. in dollar terms. And according to one OECD report, Beijing alone accounts for between 80 and 90 per cent of subsidies provided globally to the semiconductor, steel, and aluminum sectors.
