In alignment with the United States, Canada announced a 100% tariff on Chinese-made electric vehicles (EVs), including those produced by Tesla. Tesla’s shares fell by 3% on Monday in response to the news.
The Canadian government announced a 100% levy on Chinese-made electric cars and a 25% levy on steel and aluminium, aligning with Western allies to protect domestic manufacturers. This move mirrors that of the United States, Canada’s closest trading partner, where the Biden administration introduced a 100% tariff on Chinese-made EVs in May. In contrast, the European Union plans to impose much lower levies on imports from China, particularly on Tesla vehicles.
Canada introducing additional restrictions on China imports
The decision was made after a three-day closed-door meeting attended by US National Security Advisor Jake Sullivan, Canadian Prime Minister Justin Trudeau, and cabinet ministers in Halifax, Nova Scotia.
Trudeau stated: “Actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian auto and metal workers.” He also emphasised that Ottawa would continue working with the US and its allies to ensure that consumers worldwide are not unfairly penalised by the non-market practices of countries such as China.
The new EV tariffs, which include levies on certain hybrid passenger vehicles, trucks, buses, and delivery vans, will take effect on 1 October, adding to the existing 6.1% levy on imports from China. The additional levies on steel and aluminium will commence on 15 October. Deputy Prime Minister Chrystia Freeland announced that Canada would also launch a 30-day consultation to explore potential tariffs on other sectors, including batteries, solar products, chips, and critical minerals.
Canada’s 100% levy on Chinese-made Tesla
The 100% levy will also affect Chinese-made Teslas, with shares of the world’s largest EV manufacturer dropping by 3% on Monday. Vehicle identification codes indicate that the Model 3 compact sedan and Model Y crossover models were shipped from China to Canada, although the company has not disclosed specific numbers. The Canadian government stated that car manufacturers will not be impacted if they relocate production from China to other countries.
In fact, Chinese EV manufacturers have yet to capture a significant market share in Canada, with the primary electric vehicles being Chinese-made Teslas. Data from Statistics Canada shows that the value of Chinese EVs imported from China to Canada rose to C$2.2 billion (€1.97 billion) last year, up from C$100 million (€90 million) in 2022. According to data from Vancouver, Canada’s largest port, imports from China increased by 460% in 2023 when Tesla began selling Shanghai-made EVs in Canada. However, the Canadian government’s main concern is other Chinese EV manufacturers, such as BYD, which plans to enter the market as early as 2025.
In contrast, the European Commission recently updated its new levies on China, reducing an additional tariff on Tesla EVs made in China to 9%, down from the previously planned 20.8%. The EU concluded that Tesla received fewer subsidies from the Chinese government, primarily benefiting from below-market-value battery supplies, advantageous land use, and income tax reductions for exporters in China.
China labels Canada’s actions as “protectionism”
In response, the Chinese embassy in Canada issued a statement accusing Canada of disregarding World Trade Organisation (WTO) rules, describing the move as “a typical act of protectionism and politics,” which “harms consumers, businesses, and efforts towards the green energy transition and tackling global climate change.”
The statement also asserted that the rapid development of China’s EV industry and other sectors was the result of innovation, a comprehensive production and supply chain system, and competitive products, rather than reliance on subsidies for competitive advantage. The embassy warned that “China will take all necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.”
China will address the tariff issue with US officials during their meeting with Chinese Foreign Minister Wang this week, according to Xinhua News Agency.