Canada announced a significant escalation in its trade relations with China by imposing a 100% tariff on Chinese electric vehicles (EVs) and a 25% tariff on imported steel and aluminum from China. This move, set to take effect on October 1, aligns Canada with similar actions by the United States and European Union in response to what Canadian officials describe as China’s “intentional, state-directed policy of over-capacity.”
The tariffs will apply to all EVs shipped from China, including those made by Tesla, which has been exporting Shanghai-manufactured vehicles to Canada. Tesla’s shares saw a 3.2% decline following the announcement, reflecting market concerns about the potential impact on the company’s profitability. Canadian imports of Chinese automobiles surged by 460% in 2023, primarily driven by Tesla’s exports to Vancouver.
Prime Minister Justin Trudeau defended the tariffs, stating they are necessary to protect Canadian industry and consumers from unfair competition. “China is not playing by the same rules,” Trudeau said during a press conference, emphasizing that the tariffs are part of a coordinated effort with other global economies.
The Chinese embassy in Canada criticized the move as “protectionist” and in violation of World Trade Organization (WTO) rules. In a strongly worded statement, the embassy warned that the tariffs would harm economic relations and negatively impact Canadian consumers and businesses.
The decision to impose such steep tariffs is part of Canada’s broader strategy to position itself as a critical player in the global EV supply chain. The country has secured multi-billion-dollar deals with top European automakers to establish a robust EV infrastructure, and the tariffs are intended to protect this emerging industry from Chinese competition.
Analysts predict that Tesla might respond by shifting its exports to Canada from its U.S. production facilities, which could offset some of the impact of the tariffs. However, this would likely result in higher costs due to the more expensive production base in the United States. Ottawa has also indicated that it may consider additional tariffs on other Chinese goods, including chips and solar cells, as part of its ongoing efforts to counter China’s trade practices.
As Canada strengthens its stance, the broader implications for global trade and the EV market remain uncertain, with potential retaliatory measures from China looming on the horizon.
