Canada to Hit China With Tariffs on Electric Vehicles, Steel

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(Bloomberg) — Canada said it will impose new tariffs on electric vehicles, aluminum and steel made in China, backing its Western allies and taking steps to protect domestic manufacturers.

The government plans to announce a 100% tax on electric vehicles and a 25% tax on steel and aluminum, according to people familiar with the matter, who spoke on condition of anonymity because the matter remains private. Prime Minister Justin Trudeau is expected to unveil the policy in Halifax, Nova Scotia, where he and the rest of his cabinet are meeting for a series of meetings on the economy and foreign relations.

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Canada, an export-driven economy that relies heavily on trade with the United States, has been watching closely as the Biden administration moves to build a much higher tariff wall against electric cars, batteries, solar cells, steel and other Chinese products. Canada’s auto sector is highly integrated with that of its nearest neighbor: The vast majority of its light-vehicle production — 1.5 million units last year — is exported to the United States.

Finance Minister Chrystia Freeland, the most powerful person in Trudeau’s government, has been one of the most vocal advocates for a tougher approach to Chinese auto exports and a shift to a closer trading ally with the United States.

In June, it announced a public consultation on possible measures to make it more difficult for Chinese companies to sell electric vehicles in the Canadian market. It said the auto industry “faces unfair competition from China’s deliberate state-directed policy of increasing production capacity that undermines the competitiveness of Canada’s electric vehicle sector.”

In July, Freeland went further. In an interview with Bloomberg News, she said that tariff discussions might extend beyond electric vehicles.

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“Geopolitics and geoeconomics are back,” she said at the time. “That means Western countries — and the United States to a large extent — are placing a high premium on secure supply chains, and taking a different approach to China’s excess production capacity.”

“There is no illusion”

The European Union has also announced a proposal to impose new tariffs on electric vehicles imported from China, albeit at lower levels than those now proposed by the United States and Canada.

Products made by SAIC Motor Corp. face an additional 36.3% tariff, while Geely Automobile Holdings Ltd. and BYD Co. face tariffs of 19.3% and 17%, respectively, according to a draft order released last week. Tesla Inc. will be subject to an additional 9% tariff on vehicles made in China.

Chinese leaders plan to raise the tariff issue when U.S. National Security Adviser Jake Sullivan visits China this week, the official Xinhua News Agency reported. Sullivan is scheduled to meet with Foreign Minister Wang Yi and may also meet with Chinese leader Xi Jinping.

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

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The value of Chinese electric vehicles imported into Canada rose 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 vehicles arriving from China at the Port of Vancouver jumped after Tesla Inc. began shipping Model Y vehicles there from its Shanghai factory.

But the Canadian government’s main concern isn’t Tesla, but the eventual availability of cheap cars made by Chinese automakers. In July, BYD told the Canadian government it planned to lobby lawmakers and officials about its plans to enter the country.

Trudeau has also faced political and industry pressure. Canada’s auto industry has been pressing him to raise tariffs to protect local jobs and wages, arguing that Chinese electric cars are cheaper because of much weaker labor standards. The government has also bet big on automakers and manufacturers from Democratic allies: It has approved billions of dollars in subsidies for electric-vehicle or battery plants for Stellantis NV, Volkswagen AG, Honda Motor Co. and others.

Canada’s steel and aluminum producers have also publicly and repeatedly urged the government to restrict Chinese access, saying Xi Jinping’s industrial policy allows the Asian power to unfairly flood foreign markets, putting local jobs at risk.

“China is not playing by the rules,” Catherine Cobden, president and CEO of the Canadian Steel Producers Association, told reporters earlier this month. “The government should have no illusions that it is playing by the rules.”

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