The Federal Ministry of Finance officially sent a briefing paper to various groups in the electric transport sector this week, on the basis of which they will then be consulted on whether and how much to tax electric vehicles imported from China.
The federal government is launching a 30-day consultation process, which will end on 1er next August, on the “strategic interventions” that Canada could make to “protect its workers” in the automobile and electric vehicle sector. This consultation comes in response to the decisions of the United States and the European Union to impose 100% and 38% taxes respectively on electric vehicles of Chinese origin.
Work, environment, cybersecurity
The federal document, entitled Consultations on possible responses to China’s unfair trade practices regarding electric vehicleslets the cat out of the bag a bit. The question seems to be less whether Canada should tax electric vehicles imported from China in turn than how high it should do so.
It is a position that has been welcomed by leading representatives of the Canadian automotive industry. “Canada’s Global Automakers [appuient] “The government’s announcement today of upcoming consultations before the Canadian International Trade Tribunal on the possible response to unfair trade practices in the electric vehicle market,” CMAC, which represents some 20 automobile brands, from Acura to Volvo to Honda and Hyundai, quickly declared.
Ottawa says it wants to protect the country’s 125,000 jobs in the auto sector from what it considers unfair competition, given that Beijing has been generously helping its automakers for years and that they are now in a better position to sell their vehicles abroad at a price that defies all competition. The Canadian government is also concerned about Chinese companies’ compliance with labour and environmental standards.
Cybersecurity is also being discussed. Chinese companies could be required to hand over data they have on their foreign customers to Beijing without notice under Chinese law.
“The Canadian auto manufacturing sector and the people who work in it are facing unfair competition from China,” the Finance Department document says. “China is pursuing a policy of intentional state-led overcapacity and failing to meet rigorous labour and environmental standards. Chinese producers are flooding the global market, which will reduce the financial incentive for other EV manufacturers.” [véhicules électriques] in the world, including in Canada.”
China on the rise
In addition to a surtax on products from China, the government is considering at least two other measures to resolve the situation: removing vehicles made in China from purchase assistance programs and encouraging Chinese manufacturers to assemble their vehicles on Canadian soil, or at least on North American soil.
Canada finds itself in a bit of a bind in this whole thing. It obviously doesn’t want to upset its Western partners, primarily the United States, but it doesn’t seem keen on the idea of damaging its growing trade relations with China.
In the auto sector, the value of Chinese imports to us has jumped by a few tens of millions of dollars per year since 2019, reaching more than $2.2 billion last year. Only Korean imports have seen a comparable increase during the same period, rising from less than half a billion per year to $1.2 billion in 2023.
Meanwhile, U.S. auto imports rose from more than $1 billion a year before the pandemic to $5.2 billion, before falling to $3.7 billion last year.
Canada stuck
This decline in American exports is not unique to Canada. It explains Washington’s sudden reaction to China’s emergence as a leader in electrification. The result is that Canada must take a position between the pressure of its American neighbour and that of its Asian partner, notes Daniel Breton, President and CEO of Electric Mobility Canada.
“Canada, at the moment, is caught between China and the United States because of this geopolitical situation,” says Mr. Breton, whose organization represents nearly a hundred companies in the electric transportation sector.
The latter says he is unable to react to the position of the Canadian government, given that the members of his organization themselves are likely to be very divided on the issue. Because, already, brands like Tesla, Volvo and Polestar import vehicles made in China into Canada.
In fact, even General Motors sells Chinese-made vehicles in Canada, but these have gasoline engines and do not seem to be a problem.
This has led many in the industry to say that the problem is not so much Chinese competition as the inability of American manufacturers to produce affordable electric vehicles, something that Chinese brands, and even Korean brands, are apparently able to do.
In short, the only thing that seems to be understood at this stage is that electric vehicles sold in the country risk continuing to be expensive, so as not to harm a North American electric transport industry that is lagging behind its international competition.