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Amidst ongoing trade friction with the U.S., Canada faces a complex decision: should it reconsider its 100% tariff on electric vehicles (EVs) imported from China? While some economists argue that easing these tariffs could boost EV adoption and challenge Tesla’s dominance, domestic automakers voice concerns about market saturation.
Last fall, Canada mirrored the U.S. by imposing hefty tariffs on Chinese EVs, alongside surtaxes on Chinese steel and aluminum. This move occurred before a wave of tariffs from the U.S., impacting Canadian steel and aluminum used in vehicle manufacturing.
Calls for action against Tesla, fueled by public sentiment and political figures, add another layer to the debate. Some propose mirroring the existing tariffs on Chinese EVs, but directed at Tesla.
Economist Julian Karaguesian suggests rethinking the tariffs, proposing it as a targeted response to U.S. policies, saying, “If we wanted to have a targeted response to the Trump administration into his biggest financial supporter, we don’t have to tariff Tesla or American EVs…. We would just have to take off the tariff on the Chinese.”
Chinese EVs, like the BYD Seagull, offer significantly lower starting prices (around $14,600 CAD) compared to Canadian options (starting around $40,000). Canada’s tariffs have triggered retaliatory measures from China, including tariffs on Canadian rapeseed oil, oil cakes, pea imports, aquatic products and pork.
Karaguesian proposes inviting Indian and Chinese manufacturers to establish Canadian factories, alongside American and European companies. He questions whether Canada’s tough stance on China is primarily to appease the U.S.
Canadian automakers stand firm in support of the tariffs. Brian Kingston of the Canadian Vehicle Manufacturers’ Association, emphasizes the importance of protecting Canada’s burgeoning EV industry, especially with over $46 billion in EV investment since 2020, saying “China has capacity to build nearly 80 per cent of global vehicle demand. There is a huge risk if those vehicles were to flood the Canadian market,”
David Adams of Global Automakers of Canada, shares this concern, suggesting that opening the doors to Chinese EVs now would negate Canada’s investments.
Hugo Cordeau, an economics PhD candidate, suggests aligning with the EU approach: increasing surtaxes on Chinese EVs while incentivizing Chinese companies to establish European factories.
Sumeet Gulati, a professor at UBC, argues that allowing cheaper Chinese EVs could spur the development of more charging stations, a key factor for EV adoption. He acknowledges the interconnectedness of the Canadian and U.S. auto industries as a constraint.
Gulati suggests waiting for the tariff war to subside before considering a “decoupling” of the Canadian and American auto industries.
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