Canada Imposes 100% Tariff on Chinese EVs Citing ‘Extraordinary Threat’, Aligns with U.S. Policy

On Monday, the Canadian government declared a 100% import duty on electric vehicles manufactured in China, labeling them as an "extraordinary threat."

The new import duty, slated for implementation on the first of October 2024, mirrors the measures taken by the United States and aligns with terminology akin to what the European Union is employing. This comprehensive tariff impacts a broad array of products, including personal cars, buses, and trucks, encompassing all kinds of fuel such as petrol, electric, and hydrogen fuel cells, with no exemptions.

Alongside the car duty, Canada declared it will impose a 25% duty on steel and aluminum imports from China, effective from October 15, 2024.

In a move that surpasses the measures taken by the United States, Canada has restricted the availability of federal electric vehicle (EV) incentives to only those Chinese EV manufacturers that have established free-trade agreements with the nation. Meanwhile, in the U.S., under Section 45W, there are no restrictions regarding the final assembly or the sourcing of batteries and minerals. This means that American companies interested in the commercial operation or acquisition of Chinese vehicles affected by the recent tariffs could still qualify for a rebate of $7,500 or more through what's being referred to as the "leasing loophole" for EVs.

Canada has decided to follow in the footsteps of President Biden's decision to double tariffs. The Canadian Finance Department issued a statement alongside their announcement, expressing concern over China's deliberate policy of excess production and inadequate labor and environmental protections, which pose risks to global electric vehicle sector employees and enterprises, as well as Canada's enduring economic success. The statement emphasized the necessity for extraordinary actions to combat this significant danger.

In May, the Biden administration declared an increase in tariffs specifically aimed at excluding Chinese electric vehicles (EVs). The new policy doubles the existing 25% tariff on EVs to a steep 100% for the current year. Additionally, the tariff on lithium-ion batteries and their components, when used for EVs, will see a threefold increase from 7.5% to 25%. Starting in 2026, the same heightened tariffs will be imposed on lithium-ion batteries brought in from China for uses other than EVs.

Upcoming 2025 Volvo EX

It's said that this caused a hold-up in the launch of the Volvo EX30 compact electric vehicle, which was initially expected to hit the market as an import from China, followed by models manufactured in Europe.

Mexico's equilibrium is at stake, particularly regarding electric vehicles. Donald Trump, running for president, has highlighted that Mexico has claimed 34% of the U.S. car manufacturing market. He has vowed to extend the existing 100% tariffs on Chinese products to encompass all categories of vehicles, adopting strategies to compel car manufacturers to produce their vehicles in the United States instead of Mexico.

Mexico continues to be integral to the development of a trilateral trade agreement alongside the United States and Canada. Previously known as NAFTA, the agreement underwent minor modifications under the Trump administration and is now referred to as the U.S.-Mexico-Canada Agreement (USMCA).

The European version of the BYD Dolphin Electric Vehicle

Mexico, however, is emerging as the vulnerable spot in the battle to curb the influx of low-cost Chinese electric vehicles. According to the USMCA, Chinese-made EVs that utilize Mexican materials might still enter the U.S. market without facing trade tariffs. To date, Mexico has not taken any action to enhance its tariff regulations on Chinese imports.

Europe continues to resist, and it seems that in the face of Chinese electric vehicles, the application of European Union tariff regulations might not be timely. BYD from China has already launched its Dolphin EV, a highly-regarded small hatchback, on the market for under $30,000 in certain European Union countries, and the more affordable Seagull could hit the markets at a price below $20,000.

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