Tariffs on China’s Electric Vehicles Only a ‘Short Reprieve’ for Canada’s EV Sector, Trade Committee Hears

A BYD 07 EV model electric car is displayed at the Beijing Auto Show on April 25, 2024. Pedro Pardo/AFP via Getty Images

Ottawa’s tariffs on Chinese-made electric vehicles (EVs) offer only a “short reprieve” for Canada’s EV industry, the Commons trade committee was told at a recent meeting about a month after the tariffs were announced in late August.

“This is basically a short reprieve—a temporary reprieve for Canadian manufacturers in the EV supply chain to basically step up to the plate and build the things that they have promised to build with investments from a lot of public dollars, and to actually get it started,” said Elizabeth Kwan, a senior researcher with the Canadian Labour Congress, on Sept. 16.

Kwan was testifying before the Standing Committee on International Trade, whose members had adopted a motion on Aug. 21 to commence its study on “Protecting Certain Canadian Manufacturing Sectors Against Related Chinese Imports and Measures,” as first reported by Blacklock’s Reporter.

“Urgent protective measures are required to prevent lasting damage to the nascent ZEV [Zero-Emission Vehicle] industry from Chinese dumping,” said Kwan, who added that China’s trade practices would jeopardize Canada’s nearly $53 billion in support for the EV sector.

This figures comes from a Parliamentary Budget Officer (PBO) report published June 18. The report provided a list of 13 project groupings making up some $52.2 billion worth of investments and government support for the EV supply chain announced between October 2020 and April 2024, involving companies such as Honda, Northvolt, Stellantis, Volkswagen, and GM.

Of the $52.2 billion, the PBO estimated federal support to be up to $31.4 billion (60 percent) and provincial government support to be $21.1 billion (40 percent), specifically from Ontario and Quebec.

On Aug. 26, Prime Minister Justin Trudeau announced that his government will put a 100 percent tariff on Chinese-made EVs, effective Oct. 1, and a 25 percent tariff on steel and aluminum products starting Oct. 15.

Speaking during a cabinet retreat in Halifax at the time, Trudeau said the measures aimed to address China’s “unfair advantage” in those sectors.

The move would bring Canada into alignment with the United States, which implemented tariffs on imports from China in 2018 and is set to increase them in 2024. U.S. President Joe Biden in May ordered tariffs on Chinese EVs to increase from 25 percent to 100 percent effective Aug. 1. The European Commission in June announced a tariff ranging from 17.4 percent to 38.1 percent on Chinese-made EVs depending on the Chinese manufacturer.

‘Domestic Products’

Marty Warren, national director of the United Steelworkers Union, said Chinese EV manufacturers are heavily subsidized by Chinese authorities and pose a direct threat to more than 600,000 Canadian workers in the steel, aluminum, mining, and auto parts and auto manufacturing industries.

“The issue before us today goes beyond just EVs. Chinese excess industry capacity and unfair trade practices have long plagued the steel and aluminum sector. For years, we’ve been warning of the devastating effects of Chinese steel dumping, which has led to falling prices, job losses, and the decline of our domestic industry,” he told the trade committee on Sept. 16.

The union director called on the federal government to increase the use of Canadian-made steel and aluminum in public infrastructure projects.

“Public procurement policies should be a priority for these domestic products,” he said.

‘National Security’

Lawrence Herman, a special counsel with an Ottawa-based law firm, said China’s aggressive use of subsidies breaches the basic obligations of the World Trade Organization (WTO) General Agreement on Tariffs and Trade (GATT).

“They engage in strategic targeting of foreign industries through massive subsidies and exports that are developed and implemented basically to inundate and take over foreign markets in strategic areas,” Herman told the committee.

Herman, also a fellow of the Canadian Global Affairs Institute, said traditional trade remedy approaches won’t work with Beijing. “There is no way in which the traditional trade remedies, anti dumping, countervailing duties can deal with China’s aggressive strategic actions,” he said.

He suggested amending Section 53 of Canada’s Customs Tariff Act, which deals with “special measures, emergency measures and safeguards,” to include national security considerations to counter China’s trade practices.

“We have rights under WTO GATT provisions to take action when Canada’s national security interests are affected,” he said.

Matthew Horwood contributed to this report.