Canada imposes 100% tariff on Chinese-made electric vehicles from October 2024.
Context
In July 2024 the Canadian government announced that it would be imposing a 100% ‘surtax’ on all China-produced electric vehicles imported into Canada. Canada’s Deputy Prime Minister Chrystia Freeland defended the measure in public comments saying that “China has an intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry” and that “[w]e (Canada) simply will not allow that to happen to our EV sector, which has shown such promise.” This measure came into effect from October 1, 2024 pursuant to Customs Notice 24-32.
Reporting on the introduction of this mechanism, some sources noted that the decision was announced following a meeting between the Canadian Prime Minister, Justin Trudeau, and US national security advisor Jake Sullivan. The US had similarly introduced a 100% tariff on China-made electric vehicles in May 2024. Notably, Canada’s decision came alongside the announcement of a 25% tariff on imports of Chinese steel and aluminium and other measures.
Impact
Data from the Economist Intelligence Unit shows a major 2400% increase in Canada’s imports of China-made electric vehicles in 2023.
One impacted firm is Tesla, which previously produced its electric vehicles for the Canadian market in China. Reporting suggested that Tesla may seek to switch to producing its automobiles for the Canadian market either in the US or in Germany to avoid this punitive measure. Before the announcement of this measure, Tesla reportedly lobbied the Canadian government for a lower tariff rate for its own China-manufactured cars. Other electric vehicle firms that export China-made products to Canada include two of Sweden’s firms: Volvo Cars and Polestar.
This measure is also likely to limit attempts by Chinese electric vehicle firms such as BYD from moving into the Canadian market. Some commentators have speculated that these Chinese firms may seek to establish manufacturing facilities inside Canada to avoid the tariff mechanism.
In May 2024 Chinese state media tied any such possible measure to US influence, saying that “[t]here is no need for Ottawa to sacrifice normal economic exchanges with China for the sake of Washington’s strategic selfishness”, and that “[i]f Canada is led by the nose by the Americans to confront China, it won’t be good news for the Canadian economy.”
Responses
i) Chinese government and industry responses.
In response to the announcement of this policy, China’s embassy in Canada issued a statement in which it called the measure a “typical trade protectionism and politically-motivated decision, which violates the World Trade Organization(WTO) rules and goes against Canada’s traditional image as a global champion for free trade and climate change mitigation”, while adding that “China will take all necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.”
In September 2024 China announced an anti-dumping inquiry into canola imports from Canada, which has been widely viewed as a response to the electric vehicle measure. Beijing also warned Canada that it would take its complaint to the WTO.
Later in September, the Chinese Ministry of Commerce announced the initialisation of anti-discrimination investigations into Canada’s restrictive measures on Chinese electronic vehicles, steel and aluminium, and other products.
(ii) Canadian government and industry responses
Canadian Prime Minister Justin Trudeau emphasised to press that Canada’s action was in lockstep with the US and EU, saying that “What is important about this is we’re doing it in alignment and in parallel with other economies around the world.” A former Canadian ambassador to China, Guy Saint-Jacques, suggested that this decision was geoeconomically based, telling press that Canada “had to go with the U.S. position, when you think about the economic integration that we have with the U.S. More than 75% of our exports go to the U.S.”
WTO Dispute
On 11 September, prior to the entry into effect of the measure, China initiated a dispute at the WTO by lodging a Request for Consultations ( WT/DS627/1). As of December 2024, there has been no update on progress.
Status
This measure came into effect from October 1, 2024 and was due for review by Canada on October 1, 2025.
Reference list and Further Information
Chiang, S. 2024. “Canada to slap 100% import tariffs on Chinese electric vehicles over ‘unfair’ competition.” CNBC. August 27. Available at: https://www.cnbc.com/ 2024/08/27/canada-to-slap-100percent-import-tariffs-on-chinese-electric-vehicles.html
Chu, M.M. and Liu, S. 2024. “China begins anti-dumping probe into Canadian rapeseed.” Reuters. September 10. Available at: https://www.reuters.com/markets/ commodities/china-commerce-ministry-begins-anti-dumping-investigation-into-canadian-canola-2024-09-09/
Economist Intelligence Unit. 2024. “Canada’s tariff moves signal tighter alignment with US.” August 29. Available at: https://www.eiu.com/n/canadas-tariff-moves-signal-tighter-alignment-with-us/
Consulate-General of the People’s Republic of China in Toronto. 2024. “Facts and Truths on Chinese EVs: What Canada Needs to Know.” August 2. Available at: http://toronto.china-consulate.gov.cn/eng/zxdt/202408/t20240802_11465167.htm
Embassy of the People’s Republic of China in Canada. 2024. “Remarks of the Spokesperson of the Chinese Embassy in Canada.” August 26. Available at: http://ca.china-embassy.gov.cn/eng/sgxw/202408/t20240827_11479821.htm
Gillies, R. 2024. “Canada imposes a 100% tariff on imports of Chinese-made electric vehicles, matching the US.” AP News. August 27. Available at: https://apnews.com/ article/canada-china-evs-tariffs-0cd68ba7533bc6e7111cdd5811c8889c
Hu, W. “Canada has much to lose if it follows US on EV import tariffs.” Global Times. June 24. Available at: https://www.globaltimes.cn/page/202406/1314729.shtml
Government of Canada. 2024. ‘Surtax on Chinese-made Electric Vehicles’ August 26. Available at: https://www.canada.ca/en/department-finance/news/2024/08/surtax-on-chinese-made-electric-vehicles.html
Ljunggren, D. 2024. “Exclusive: Tesla asked Canada for lower tariff on China-made EVs, government source says.” Reuters. August 29. Available at: https://www.reuters.com/ business/autos-transportation/tesla-asked-canada-lower-tariff-china-made-evs-government-source-says-2024-08-28/
Mukherjee, P. and A. Sriram. 2024. “Canada tries to halt China’s EV flood with 100pc tariffs.” AFR. August 27. Available at: https://www.afr.com/world/north-america/canada-tries-to-halt-china-s-ev-flood-with-100pc-tariffs-20240827-p5k5rx
Ministry of Commerce of the People’s Republic of China. 2024. ‘Notice on launching an anti-discrimination investigation into Canada’s restrictive measures against China’ [关于加拿大对华相关限制性措施进行反歧视调查的公告] September 26. Available at: https://trb.mofcom.gov.cn/mybldc/art/2024/art_58c0fcdb09b2475fa9b4e79863fd3c17.html.
Pao, J. 2024. “Beijing rips Canada’s 100% tariffs on China-made EVs.” Asia Times. August 28. Available at: https://asiatimes.com/2024/08/beijing-rips-canadas-100-tariffs-on-china-made-evs/
Rana, U. 2024. “Tariffs on Chinese EVs are now in effect. What does that mean for Canadians?” Global News. October 1. Available at: https://globalnews.ca/news/ 10787673/canada-tariffs-chinese-evs/
Sherman, N. 2024. “China hits back at Canada EV tariffs with canola probe.” BBC News. September 4. Available at: https://www.bbc.com/news/articles/c93p2yev3w2o
Zhang Siyuan 2024. “‘The true reasons behind Canada’s tariffs on Chinese EVs”’ Xinhua [加拿大对中国电动汽车征税背后的“算计”] September 7. Available at: http://www.news.cn/world/20240907/0f414242b2284f43961ed02cb106bfc9/c.html.