Will Canada join the U.S. in a tariff battle against Chinese EV imports?
New tariffs on electric vehicles could risk triggering retaliation from Beijing
The Canadian government appears set to push back against the explosive growth in Chinese electric vehicle imports by joining its allies in a tariff battle that risks triggering retaliation from Beijing.
On Thursday, Ontario Premier Doug Ford called on the federal government to "immediately match or exceed U.S. tariffs on Chinese imports, including at least a 100 per cent tariff on Chinese electric vehicles."
"Taking every advantage of low labour standards and dirty energy, China is flooding the market with artificially cheap electric vehicles. Unless we act fast, we risk Ontario and Canadian jobs," the premier said in a media statement.
Several hours later, Prime Minister Justin Trudeau appeared to agree.
"Doug Ford and I, the Ontario government and the government of Canada, have worked closely together over the past years to build one of the strongest electric vehicle ecosystems in the world here in Canada," the prime minister told reporters in Nova Scotia.
"We are watching closely what the Americans and other allies have done. We will look very carefully at what steps need to be taken to ensure that the Canadian auto industry and Canadian consumers are well supported in years to come."
So does that mean a Canadian decision to impose tariffs and remain in lockstep with its top ally and trading partner is imminent?
When CBC News followed up with Trade Minister Mary Ng's office, they said Finance Minister Chrystia Freeland is leading this file. Freeland discussed this issue Monday evening over dinner with U.S. Treasury Secretary Janet Yellen.
"China has an intentional, state-directed policy of over-capacity," Freeland's spokesperson Katherine Cuplinskas wrote in an email. "We are actively considering next steps to counter Chinese oversupply. Protecting Canadian jobs, manufacturing, and our free trade relationships is essential."
Import data reinforces the threat
Trudeau said he had "significant conversations" with other G7 leaders in Italy last week about what trade diplomats refer to as "Chinese oversupply."
Canada's status as the only member of the G7 with preferential trade agreements in place with all other partners also opens up the possibility that Beijing might use Canadian ports and dealers as a back door into the U.S. consumer market.
Statistics Canada data for the first four months of 2024 show a year-over-year increase of over 1,200 per cent in the Canadian dollar value of electric motor vehicles imported from China — a thirteen-fold increase compared to last year. This trend could continue, with more spikes in trade volumes later in the year as next year's models arrive. North American carmakers have been sounding the alarm about this data for months.
In Canada, much of this import volume traces back to Tesla's gigafactory in Shanghai.
Other Chinese brands are also becoming increasingly common on European streets. That prompted the European Commission earlier this month to slap on an anti-subsidy duty of 38.1 per cent starting in July.
In an opinion piece published in the Financial Post this week, Flavio Volpe, president of the Automotive Parts Manufacturers' Association, encouraged consumers to ask themselves why Chinese EVs are so cheap.
Volpe pointed out that a rare strike at a Chinese automaker this year revealed that its employees work 12 hours a day, six days a week to make less annually than what Canadian auto factory employees make in a month.
He also reiterated his view that Canada's policies have been incoherent.
To meet their climate change goals, Canadian governments have been using taxpayer money to fund various consumer incentives to purchase EVs and the federal government is requiring that all new vehicle sales in Canada be electric by 2035.
Because China's state-run economy has been preparing for automotive electrification for years, it now dominates EV battery making and has exports ready to go in response to the drive to pull gasoline vehicles off Canadian streets.
But if low-emitting Chinese brands get too much of a foothold in North America, that would undermine the effect of billions of dollars in taxpayer-funded investment tax credits and production subsidies federal and provincial governments ponied up to bid for new manufacturing plants in Canada.
Retaliation risks
If Canada joins this tariff fight, it can't assume Beijing won't hit back.
On Monday, the Chinese commerce ministry said a June 6 complaint submitted by the China Animal Husbandry Association had triggered an anti-dumping investigation of pork products imported from the European Union.
While the date given for that complaint precedes the European Commission's June 12 announcement of its 38.1 per cent EV tariff, the June 17 announcement led to suggestions that this was, in fact, a thinly disguised tit-for-tat retaliatory move intended to strike fear into Europe's politically powerful farm sector.
EU pork exports can continue tariff-free while the investigation continues, but the threat to major suppliers in Spain, the Netherlands and Denmark was clear and sparked immediate concern about the risk of losing access to the Chinese market.
China has not retaliated directly against Germany's automotive sector, which had spoken out against action on Chinese EVs.
"Isolation and illegal customs barriers — that ultimately just makes everything more expensive, and everyone poorer," German Chancellor Olaf Scholz warned in a recent statement. "We do not close our markets to foreign companies, because we do not want that for our companies either."
Beijing is fond of using what trade observers call "commodity diplomacy" to bully smaller countries when it feels its national interests are threatened.
Canadian livestock and canola farmers have felt China's wrath in the past. Falling into line with the Biden administration on EV tariffs could trigger another round of rhetoric from the Chinese foreign ministry about how Canada isn't considering its own national interests when it complies with U.S. demands.
A national security threat?
The Biden administration's decision to build a new tariff wall around its domestic industry may also be motivated by national security concerns.
During the Trump administration, national security was evoked as a justification to apply steel tariffs; reliance on imports for such a critical manufacturing input, especially for defence industries, was considered an unacceptable threat.
Members of the Five Eyes intelligence alliance — Canada, Australia, New Zealand, the United Kingdom, and the United States — also monitor Chinese industrial strategy for espionage threats.
U.S. authorities recently charged a Canadian national with conspiring with a Chinese businessperson to steal trade secrets to set up a rival EV battery company in China.
Consumers and privacy watchdogs are increasingly concerned about the artificial intelligence features in the latest EV models. Tesla employees, for example, were found last year to have shared invasive images from that brand's built-in cameras that the owners and drivers of those vehicles had no idea would be collected and retained.
In the aftermath of this controversy, Tesla clarified its privacy policies to reassure its customers. In Canada, owners must opt-in to share their personal data, and the company says it never sells or rents its car data to third parties.
Canada's privacy commissioner expressed concern about connected cars as far back as 2017. But in a globally-connected world, some of the national security concerns this technology triggers may be beyond that office's jurisdiction.
If video clips or still images from in-vehicle cameras are stored on a server in China, for example, it's accessible to Chinese Communist Party officials; privacy protections citizens in North America enjoy would not apply.
It's a concern adjacent to ones expressed about data storage at the Chinese parent company of the TikTok social media app. Companies based in China aren't allowed to refuse demands from the state to hand over their corporate data.
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