Canada announced on Monday that it will follow the United States and the European Union and impose a 100% tariff on electric vehicles imported from China starting October 1. The new surcharge will be levied in addition to the existing 6.1% tariff.

According to foreign media reports, Canada announced on Monday (26th) that it would impose a 100% tariff on electric vehicles imported from China, and announced a 25% tariff on steel and aluminum imported from China.

For China, the increase in tariffs will directly affect its exports of electric vehicles and other related products. According to data from Statistics Canada, Canada imported a total of 2.2 billion Canadian dollars (about 11.6 billion yuan) of Chinese electric vehicles last year.

Canadian Prime Minister Justin Trudeau said Canada is taking action to respond to China's "subsidy" policy for electric vehicles. A few months ago, Canadian Deputy Prime Minister and Finance Minister Chrystia Freelandc was concerned that the development of China's auto industry is undermining Canada's competitiveness in the local and global electric vehicle market.

Justin Trudeau said Canada will continue to cooperate with the United States and other allies and is considering taking further measures to impose tariffs on Chinese chips and solar cells. But he did not disclose specific details.

In May this year, the US government announced that tariffs on Chinese electric vehicles would be increased to 100%, and tariffs on semiconductors and solar cells would be increased to 50%. The 301 tariffs on 14 categories of Chinese products were increased, and electric vehicles were increased to 100%.

Last week, the EU imposed tariffs of up to 36.3% on imported electric vehicles, and only 9% on Tesla. Among them, BYD will be subject to a 17% anti-subsidy tax, Geely Automobile will be subject to a 19.3% anti-subsidy tax, and SAIC will be subject to a 36.3% anti-subsidy tax. Other Chinese automakers that did not accept the sampling survey but cooperated with the EU investigation will be subject to a 21.3% anti-subsidy tax.

01 Tesla is the first to bear the brunt

China is Canada's second largest trading partner. In the Chinese electric vehicle market, except for Tesla, which occupies a high proportion of about 40%, Chinese cars mainly enter the Canadian market through parallel imports, and the sales volume is not high.

Canada is trying to position itself as a key link in the global electric vehicle supply chain. In order to consolidate the domestic manufacturing core, the country has signed multi-billion dollar agreements with European automakers throughout the automotive industry chain to attract top European automakers to participate in all links of the electric vehicle supply chain.

It should be noted that due to geographical location and other reasons, the domestic electric vehicle market in Canada itself is not well developed. According to the Financial Times, the automotive manufacturing industry is one of Canada's most important manufacturing industries, and its factories are concentrated in the Great Lakes region. Data from the Canadian government show that the industry directly employs nearly 120,000 people.

According to data released by Statistics Canada, in the first four months of this year, the total amount of electric vehicles imported by Canada from China increased by more than 1,200% year-on-year.

In 2023, Canada's electric vehicle sales will be about 185,000 units. Although it has increased by about 50% year-on-year, it still only accounts for 11% of the total new car registrations, and most of the electric vehicles imported by Canada from China are produced by Tesla's Shanghai factory.

According to Canadian data, after Tesla began shipping Model Y from China to the Port of Vancouver, the number of cars shipped from China to the Port of Vancouver in 2023 surged 460% year-on-year to 44,356. Canada also allows consumers to obtain up to 5,000 Canadian dollars in federal tax rebates for electric vehicles through the federal tax rebate program when purchasing foreign-made electric vehicles (such as Tesla's Model 3 and Model Y models).

Brands such as Tesla may increase their costs due to tax increases in various countries, which will affect their pricing strategies in the global market. The reasons for Tesla's price increase include rising raw material costs, increased transportation and logistics costs, and high production line pressure and rising production costs. In addition, Tesla sales staff have revealed that the price increase may be to repair its severely declining profitability.

02 China's response

According to China News Network, the spokesperson of the Chinese Embassy in Canada made a statement on the same day regarding Canada's additional tariffs on Chinese electric vehicles, saying that China expressed strong dissatisfaction and resolute opposition to this. Canada's move is completely harmful to others and not beneficial to itself. China will take all necessary measures to safeguard the legitimate rights and interests of Chinese companies.

The spokesperson of the Chinese Embassy in Canada pointed out that Canada's move is a typical trade protectionism and politically dominated behavior, disregarding WTO rules, and inconsistent with Canada's position as an advocate of global free trade and climate change. This move will undermine the normal economic and trade cooperation between China and Canada, harm the interests of Canadian consumers and enterprises, and be detrimental to Canada's green transformation and global efforts to respond to climate change. It is completely harmful to others and not beneficial to itself.

The spokesperson emphasized that the rapid development of China's electric vehicles, etc., relying on continuous technological innovation, a sound supply chain system and full market competition, is the result of the combined effect of comparative advantages and market laws, not relying on subsidies to gain competitive advantages. Canada's accusation of China's so-called "overcapacity" is groundless. The development of China's electric vehicle industry has made positive contributions to the world's response to climate change and the realization of green energy transformation.

The spokesperson said that China urges Canada to respect objective facts, abide by WTO rules, immediately correct its wrong practices and not politicize economic and trade issues. China will take all necessary measures to safeguard the legitimate rights and interests of Chinese companies.

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