Canada Imposes 100% Tariff on Chinese EVs, Aligns with US and EU Trade Policies

The northern neighbor of the US, Canada is deeply connected with the country, particularly in the automotive sector, where more than 75% of Canadian car output is shipped to the US

Following the lead of the US, Canada announced to impose a 100% tariff on the import of Chinese EVs. The country also announced a tariff of 25% on steel and aluminum imported from China. 

The prime minister, Justin Trudeau, stated that Ottawa was trying to offset what he described as China’s premeditated, state-directed program of overcapacity. However, he did not indicate whether tariffs will be eased or remain unchanged on Tesla, whose shares fell more than 3% on Monday on the announcement.

“I think we all know that China is not playing by the same rules,” he said. The tariffs will be imposed starting on 1 October this year.

“What is important about this is we’re doing it in alignment and in parallel with other economies around the world,” Trudeau said.

Ottawa will continue to collaborate with the United States and other partners to ensure that customers worldwide are not unfairly disadvantaged by countries like China‘s non-market practices, Trudeau stated.

Trudeau said Ottawa is further searching for corrective measures such as tariffs on solar cells and chips.

The decision made by the Trudeau government is similar and follows the Biden administration’s decision taken in May. The decision was to impose and increase tariffs to 100% on EVs made in China. Smaller tariffs were also levied on strategic goods that are necessary for the production of EV. Among other products solar cells, semiconductors and lithium batteries were included. 

The northern neighbor of the US, Canada is deeply connected with the country, particularly in the automotive sector, where more than 75% of Canadian car output is shipped to the US.

The EU seems to also have taken a similar action. The EU introduced new tariffs at the beginning of July which ranged from 17.4% to 37.6% on imported EVs from China. With a 10% duty levied on EV from China was in place from before. The EU’s focus is on reducing the market impact of low-cost EVs that receive considerable Chinese government subsidies.

In May, Joe Biden announced a quadrupling of tariffs on Chinese electric vehicles to 100%, a doubling of charges on semiconductors and solar cells to 50%, and new 25% tariffs on lithium-ion batteries and other critical items such as steel to protect businesses from Chinese surplus production.

Earlier this month the EU imposed tariffs on EVs that were imported of up to 36.6%.

Ottawa has been making efforts to make Canada one of the most critical parts of the global supply chain of EV. The country was also under pressure to act against China from most of their domestic industries. 

Trailing far behind the US, China is the second largest trading partner of Canada. Data from Canada’s major port, Vancouver, show that imports of autos from China increased 460% annually in 2023, when Tesla began delivering Shanghai-made EVs to Canada.

The Chinese exports to Canada that began in the first half of 2023 are not yet disclosed by tesla. Although the identification code on the vehicles indicated that Model 3 compact sedans and Model Y crossovers were being transferred from the company’s Shanghai Gigafactory to Canada.

Seth Goldstein, the equity strategist said in response to the tariffs, Tesla would export autos to Canada from the US and would shift logistics. With the changing tariffs the market is likely to react with the drop in shares and weigh potential profits in case of exports of Tesla to Canada compared to its higher cost production in the US. 

The EU levied a new decreased additional tariff of 9% on Tesla, which is lower than the 36.3% it imposed on other Chinese EV imports.

Canada has signed billion-dollar partnerships to bring in top European automakers in all stages of the EV supply chain in order to strengthen its manufacturing heartland.

The implementation of US tariffs has been delayed until September, and it is possible that scheduled penalties will be reduced this week.