Ottawa expected to announce tariff plan for Chinese EVs after U.S. move

Finance Minister Chrystia Freeland is expected to announce Monday morning a plan for potential tariffs to protect Canada’s electric vehicle supply chain from unfair Chinese competition.

Freeland and International Trade Minister Mary Ng are making a joint announcement on Monday following moves this spring by both the United States and Europe to hike import tariffs on Chinese-made EVs.

Before Canada can impose new tariffs, an anti-subsidy investigation must be completed by the Canadian International Trade Tribunal.

Currently, the only Chinese-made EVs imported into Canada are Teslas made at the U.S. tech giant’s Shanghai factory.

China is a bigger player in Canada when it comes to batteries and battery components for EVs, industries Canada has invested heavily in over the last four years.

In 2021, almost 80 per cent of all lithium-ion batteries for electric vehicles globally came out of China and the International Energy Agency says almost 60 per cent of global EV sales are now Chinese-made.

Accusations that China has spurred its own EV industry through unfair subsidies led to both Europe and the U.S. retaliating this spring.

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U.S. President Joe Biden announced in mid-May that he is hiking tariffs on Chinese EVS from 25 per cent to 100 per cent this year though there is only one Chinese EV currently available in the U.S.

Biden also announced a hike to tariffs on lithium-ion batteries and some other clean energy products including solar cells.

The European Commission is still completing its anti-subsidy investigation but announced two weeks ago that it will impose provisional tariffs of between 17 per cent and 38 per cent on Chinese-made EVs as of July 4.

That plan could change as both Europe and China agreed to negotiations on the matter over the weekend.

Chinese-branded EVs now make up eight per cent of the European market, compared with one per cent in 2019. Europe says its preliminary findings confirmed Chinese EVs are benefiting from “unfair subsidization.”

Many Chinese EVs are substantially cheaper than similar European-made models.

Where Canada lands on tariffs will depend on the consultation process. A government source, speaking on the condition they not be named because they were not authorized to speak publicly, told The Canadian Press a brief consultation period usually occurs before imposing precise tariffs.

Prime Minister Justin Trudeau has repeatedly said since the U.S. announcement that Canada was watching very closely and deciding what it will do.

On June 12, the day the European Commission announced its provisional tariffs, Ng told reporters on Parliament Hill that Canada was working on its own plan.

“The status is that we are working on it, and I’ve been very clear about this,” she said. “This issue is one that we’re concerned about.”

Ng said then she was already talking to Canadian industry.

Typically the process for launching an anti-subsidy investigation starts with a complaint from the industry.

“We’ve invested deeply and heavily in the electric vehicle supply chain,” she said.

Since 2020, Canada has attracted more than $46 billion in investments for 13 electric vehicle, battery and battery component manufacturing projects. Ottawa and the provinces have jointly promised up to $53 billion in return, including tax credits, production subsidies and capital investments.