Canada to consider blocking factories in pushback on Chinese EVs

Prime Minister Justin Trudeau’s government has published options it will consider for deterring Chinese-made electric vehicles from accessing the Canadian market, including putting tariffs on imported and blocking Chinese investment in new Canadian factories.

Trudeau’s government appears to only be considering tariffs on finished vehicles, based on the document released Tuesday. The list of items that could see tariffs doesn’t include batteries or battery components, for example. 

The paper was released as part of the formal consultations Canada must conduct before imposing tariffs. Those consultations, announced by Finance Minister Chrystia Freeland last week, will seek feedback from stakeholders including labor unions and automotive industry groups, and will run until Aug. 1.

Canada’s EV industry is “at risk of being undermined by the significant recent increase in exports of Chinese EVs to the Canadian and global markets, enabled by unfair support through China’s use of a broad range of non-market policies and practices,” the consultation paper says.

The Chinese policies include “pervasive subsidization, including of the supply chains of necessary components, problematic or non-existent labor and environmental standards, and other measures to artificially lower production costs, which is leading to significant overcapacity in Chinese EV production,” the document says.

The paper doesn’t provide potential tariff rates and instead asks for feedback on what those may be for various vehicle classes. It also seeks comment on how tariffs might affect EV affordability in general.

In another section, the paper considers the possibility that “Chinese companies could seek to establish facilities to manufacture EVs within Canada” in an attempt to “access the North American market in light of potential tariff measures.”

The document asks for feedback on whether “additional actions like further policy guidance, monitoring, or restrictions related to transactions and investment from Chinese sources in the Canadian EV supply chain are required.”

Two other areas are outlined for feedback. One is whether Canada should make Chinese-made EVs ineligible for federal consumer incentives. The other is on data privacy and security considerations for connected vehicles and related infrastructure.

In considering tariffs and other measures, Canada is following in step with its allies. The US unveiled plans this spring to nearly quadruple US tariffs on Chinese-manufactured electric vehicles, up to a final rate of 102.5%. The European Union also plans to increase tariffs, taking those levies as high as 48% on some vehicles.

Although the value of Chinese EVs imported by Canada has surged recently, there has so far been little activity involving Chinese domestic vehicle makers. 

The vast majority of Canada’s EV imports from China are Tesla Inc. vehicles produced from its Shanghai factory. Freeland wouldn’t comment on whether tariffs might apply to those vehicles.