Trade tensions escalate as Canada slaps EV tariffs on China

Canada has joined the U.S. and E.U. in ramping up tariffs on China-made electric vehicles, even as other countries soften their stance on the issue.

Driving the news: It was only a matter of time before Canada followed suit in addressing the topic of Chinese EVs.

• On Monday, the country said it would implement a 100% tariff on EVs imported from China. It also plans to levy a 25% tariff against steel and aluminum imports.

• Governments outside of China have accused the country’s car manufacturers of benefitting from unfair subsidies, causing them to pose a threat to domestic industries.

Zooming in: Canada’s decision extends to Tesla, somewhat negating its recent victory against the E.U.

• Originally, European nations planned to charge duties up to 20.8% on Teslas manufactured in China.

• In response, the company asked that the E.U. recalculate its rates based on the actual subsidies received by different brands.

• Last week the E.U. agreed to cut Tesla’s rate down to 9% to better reflect the assistance it receives from the Chinese government. It also adjusted tariffs for other China-based exporters.

Zooming out: While all this has been going on, another development has been brewing behind the scenes in the U.S.

• Earlier this year, the Biden Administration heavily increased tariffs against Chinese EVs as well as other imported goods.

• But automakers and other companies are calling for a de-escalation of the White House’s mandate, citing an increase in costs on their part.

• While the new duties were originally scheduled to go into effect this month, the date was pushed back to September to give the U.S. Trade Representative’s office enough time to review over 1,100 comments received from the public.

Bottom line: Given that both the U.S. and E.U. have shown some flexibility toward companies, it’s possible Canada will also re-adjust its EV tariffs down the line. But whatever happens, it seems unlikely that countries will avoid competition with China in the auto sector.

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