This week, we’ve heard a lot about the 100% tariffs on Chinese electric vehicles. However, many are looking into the suspected impacts of this measure, but no one explains to us what this 100% means. Is it 100% of the usual tariffs? Or 100% of the usual price of the vehicle? And what are the usual tariffs for a vehicle produced by an exporting country? A rate of 100% without a basis for comparison means nothing… Could someone explain all this to us?
Gilles Desjardins
You point out: the Canadian government confirmed that it would impose a 100% surtax on customs tariffs on electric vehicles that were built in China, on August 26.
This 100% customs surcharge applies to the value of the vehicle at customs, as purchased by Canadian dealers.
“We do not calculate the customs surcharge on the sale price [au détail]but on the declared customs value. So, there is a little subtlety. It is the price that we paid to import it,” explains Geneviève Dufour, full professor at the Faculty of Law of the University of Ottawa and specialist in international economic law.
The initial import tariff was 6.1%. From 1er October, this customs tax will therefore reach 106.1%.
In other words, if a Canadian dealer bought a Chinese vehicle worth $10,000 at customs, the transaction cost him $10,610 before the measure imposed by the federal government. Now, the same vehicle costs him more than $20,000, or double its market value. The dealer is then free to set the retail price of his choice, but it will almost certainly be higher than if he had not had to pay customs tariffs.
The repercussions
Mme Dufour explains that an import tax of at least 25% on a country’s tariff list is generally intended to prevent a product from entering it, or at least to make it uncompetitive. It was China’s “unfair practices” that were cited by the federal government to explain this trade decision last August.
However, this measure could lead to a reduction in the supply of affordable electric vehicles in Canada.
Electric vehicles built in China are very competitively priced compared to those sold in the Canadian market right now. For example, automaker BYD, which was looking to enter the Canadian market soon, is offering electric vehicles priced around $20,000 USD.
For Geneviève Dufour, it is a good thing that the Canadian government is reacting to the violation of human rights and the weak environmental protection in the world of work in China. But she questions the legality of the implementation of this measure, and the emergence of a possible “new trade war.”
Canada has followed the United States, which will also impose 100% tariffs on electric vehicles built in China, President Joe Biden announced in May. With the same goal, the European Union has opted for tariffs that can reach 38%, depending on the vehicle brand.
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