Canada announced it will impose a 100% tariff on Chinese electric vehicles (EVs), starting October 1, aligning with similar moves by the United States and European Union. This measure will impact all EVs imported from China, including those manufactured by Tesla. Additionally, a 25% tariff will be applied to imported steel and aluminum from China. These actions aim to counter what Canadian Prime Minister Justin Trudeau describes as China’s state-driven over-capacity strategy.
In 2023, Canadian imports of automobiles from China surged by 460% year-over-year to 44,356 units, largely due to Tesla’s decision to ship Shanghai-made EVs to Canada. Despite the growing numbers, Canada is now taking a firm stance against these imports, citing concerns over unfair market practices. Prime Minister Trudeau emphasized that this decision is part of a coordinated effort with other global economies to address these concerns.
The Chinese embassy in Canada criticized the move, labeling it as “protectionist” and politically motivated, accusing Canada of violating World Trade Organization (WTO) rules. The embassy argued that these tariffs could damage bilateral trade relations and harm Canadian consumers and businesses. China has urged Canada to comply with WTO guidelines and refrain from politicizing trade matters.
While Tesla has not disclosed its export figures from China to Canada, reports indicate that models such as the Model 3 and Model Y are being shipped from Shanghai to Canada. With the new tariff, Tesla and other manufacturers may need to reconsider their supply chain strategies. According to a Canadian government official, companies manufacturing in China could avoid the tariff by relocating production to other countries.
Market analysts predict that Tesla might shift its exports to Canada from the United States, given the high costs associated with the tariffs on Chinese-made vehicles. Seth Goldstein, an equity strategist at Morningstar, noted that the market’s negative reaction to the announcement reflects concerns over potential profit impacts if Tesla moves to a higher-cost production base in the U.S.
Canada’s actions align with similar initiatives in the United States, where President Joe Biden announced a quadrupling of tariffs on Chinese electric vehicles and new tariffs on other strategic goods to protect domestic industries from China’s excess production. Furthermore, Trudeau hinted at additional punitive measures, including potential tariffs on chips and solar cells, although specific details were not provided.
China remains Canada’s second-largest trading partner, significantly trailing the United States. China’s primary imports from Canada include petroleum, rapeseed, iron ore, and non-monetary gold, among other crops and commodities. Beijing may consider retaliatory measures, as seen in its responses to EU tariffs.
Canada’s move reflects its broader strategy to position itself as a key player in the global EV supply chain. The country has secured deals worth billions of dollars with major European automakers to bolster its domestic EV industry. Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, expressed support for the tariffs, emphasizing the importance of protecting Canadian markets and innovation.
Featured Image courtesy of The Japan Times
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