Canada Imposes a 100% Tariff on Imports of Chinese-made EVs
On August 26, 2024, Canada announced a 100% tariff on EVs imported from China and a 25% tariff on Chinese steel and aluminum, following similar actions by the United States and the European Union. This move is likely aimed at protecting domestic industries and addressing concerns over China’s trade practices. The tariffs will affect all EVs coming from China, including those produced by Tesla, which manufactures some of its vehicles in China for export. The news of these tariffs has already impacted Tesla’s stock, which fell by 3%. This development could have broader implications for the global EV market and trade relations between Canada and China, especially given Tesla’s significant role in the EV industry.
Canadian imports of automobiles from China surged dramatically in 2023, with a 460% year-over-year increase, largely driven by Tesla’s decision to start shipping Shanghai-made electric vehicles (EVs) to Canada. This significant rise in imports has prompted the Canadian government to take action.
“In response to the tariffs, I would expect Tesla would shift its logistics and potentially export autos to Canada from the U.S.,” said Seth Goldstein, equity strategist at Morningstar.
Prime Minister Justin Trudeau announced the new tariffs, emphasizing that they are a response to China’s state-directed policies that have led to over-capacity in various industries, including automotive and metals. Trudeau accused China of not adhering to fair trade practices.
These tariffs are set to take effect on October 1, 2024, and are part of Canada’s broader strategy to counter what it views as unfair trade practices by China. The decision reflects growing concerns in Canada and other Western countries about the impact of China’s economic policies on global trade and domestic industries.
“What is important about this is we’re doing it in alignment and in parallel with other economies around the world,” Trudeau said.
“It is a 100% surtax on all Chinese-made EVs. If companies currently making vehicles in China choose to move their production to a different country, they would no longer be captured by this tariff,” a Canadian government official said.
The decision by Canada to impose tariffs on Chinese imports, including electric vehicles, appears to have been influenced by discussions with U.S. national security advisor Jake Sullivan. During a meeting with Canadian Prime Minister Justin Trudeau and his Cabinet ministers on Sunday, Sullivan reportedly encouraged Canada to take this step. This collaboration underscores the close coordination between the U.S. and Canada in addressing concerns about China’s trade practices.
Sullivan’s visit to Canada is part of a broader diplomatic effort, as he is scheduled to make his first visit to Beijing on Tuesday. This visit to China could be significant, as it comes amid heightened tensions over trade and security issues. The timing suggests that the tariffs may also be a strategic move to strengthen the U.S. and its allies’ position in upcoming negotiations with China.
Chinese electric vehicle (EV) brands, while not yet a significant presence in Canada, are starting to make moves to enter the market. One notable example is BYD, one of China’s leading EV manufacturers, which established a Canadian corporate entity last spring. BYD has signaled its intention to enter the Canadian market as early as next year.
The timing of Canada’s new tariffs could pose a significant challenge for BYD and other Chinese automakers planning to expand into Canada. With a 100% tariff on Chinese-made EVs set to take effect on October 1, 2024, the cost of entering the Canadian market may become prohibitive for these companies. This could delay or complicate their plans and might also impact Canadian consumers’ access to more affordable EV options.
BYD’s plans to enter Canada highlight the growing interest of Chinese automakers in expanding their global footprint, but the new tariffs could significantly alter the competitive landscape for them in North America.
