Canada Considers Surtax on Chinese Electric Vehicles to Counter Global Oversupply
In an effort to protect its domestic automotive sector and support Canadian jobs, Canada’s government is looking into the possibility of imposing a surtax on imports of Chinese-made electric vehicles (EVs). The decision comes after both the United States and the European Commission recently announced plans to impose higher import tariffs on Chinese EVs.
The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, has initiated a 30-day consultation period starting on July 2nd to examine the issue. Freeland raised concerns about China’s deliberate state-directed policy of overcapacity, which she believes is leading to a global oversupply of EVs. She emphasized that this oversupply has placed Canadian workers and the auto sector at a disadvantage due to unfair competition.
Canada’s automotive sector currently supports around 550,000 Canadian jobs. Freeland expressed her commitment to ensuring that China’s unfair market practices, labor standards, and environmental practices are addressed in the consultation. This investigation aims to determine the driving factors behind China’s surge in EV exports and evaluate their impact on Canada’s ability to compete in domestic and global markets.
The consultation will assess the possibility of implementing a surtax on Chinese-made EVs and examine whether adjustments should be made to the federal EV purchase rebate program. Currently, eligible vehicles can receive up to $5,000 Canadian ($3,661) in rebates. The potential expansion of investment restrictions in Canada will also be considered.
It is important to note that, at present, the only Chinese-made EVs imported into Canada are from Tesla’s factory in Shanghai. There are no Chinese-branded EVs being sold or imported into the country. Freeland emphasized that Canada will coordinate its actions with its allies in the United States and the European Union. As North America has an integrated auto sector, Canada aims to prevent becoming a dumping ground for Chinese oversupply.
Canadian concerns align with those expressed by U.S. President Joe Biden, who has criticized Chinese government subsidies for EVs and other consumer goods. Biden believes these subsidies give Chinese companies an unfair advantage in global trade by enabling them to avoid turning a profit.
By considering a surtax on Chinese-made EVs, Canada hopes to level the playing field for its domestic auto sector in the face of China’s deliberate overcapacity strategy. The consultation will provide an opportunity for stakeholders and the public to contribute their insights and experiences, ensuring a comprehensive assessment of the issue. Canada’s effort to align with its allies in addressing unfair trade practices demonstrates the importance of cooperative action in safeguarding domestic industries.