Canada Imposes Surcharges Against Imports Of Chinese EVs

Canada Imposes Surtaxes On Chinese EVs, Boost Supply Chain

After the United States (US), and European Union (EU), the Canadian government has now implemented new measures to protect its workers and key economic sectors from unfair Chinese trade practices while supporting job creation in the electric vehicle (EV) supply chain.

Canada’s steel and aluminum sectors have supported over 130,000 jobs nationwide. However, Canadian auto workers and the auto sector face unfair competition from Chinese producers, who benefit from non-market policies and practices. China’s state-directed policy of overcapacity and lax labor and environmental standards threaten workers and businesses in the EV industry worldwide and undermine Canada’s long-term economic prosperity. Recent consultations with stakeholders have confirmed the need for exceptional measures to address this significant threat.

In Halifax, Chrystia Freeland, Deputy Prime Minister and Minister of Finance announced a series of measures designed to level the playing field for Canadian workers and enable Canada’s EV industry and steel and aluminum producers to compete in domestic, North American, and global markets. The recent measures undertaken by the Canadian government are:

First, the Canadian government intends to implement a 100 percent surtax on all Chinese-made EVs, effective October 1, 2024. This includes electric and certain hybrid passenger vehicles, trucks, buses, and delivery vans. The surtax will be in addition to the existing Most-Favoured Nation import tariff of 6.1 percent that is currently applicable to EVs produced in China and imported into Canada.

Second, the federal government plans to apply a 25 percent surtax on imports of steel and aluminum products from China, effective October 15, 2024. This measure aims to protect Canadian workers from China’s unfair trade practices and to prevent trade diversion resulting from recent actions taken by Canada’s trading partners. An initial list of goods is being released today for public comment. The final list of goods subject to the surtaxes will be announced by October 1, 2024, with the surtaxes taking effect on October 15, 2024. The surtaxes will not apply to Chinese goods in transit to Canada on the day these surtaxes come into force.

Third, the Canadian Government will launch a 30-day consultation on other sectors critical to Canada’s future prosperity, including batteries and battery parts, semiconductors, solar products, and critical minerals. A consultation notice will be released in the coming days to inform any further government action.

Fourth, the federal government intends to limit eligibility for the Incentives for Zero-Emission Vehicles (iZEV), the Incentives for Medium and Heavy-Duty Zero Emission Vehicles (iMHZEV), and the Zero Emission Vehicle Infrastructure Program (ZEVIP) to products made in countries that have negotiated free trade agreements with Canada.

The federal government plans to review the measures announced today within one year of their implementation. These actions may be extended or supplemented by additional measures as necessary.

Investments in sectors critical to the net-zero transition, such as batteries, semiconductors, solar, and critical minerals, are also jeopardized by China’s non-market practices. For example:

According to BloombergNEF, in 2023, China’s battery production alone was sufficient to meet total global demand.
The International Energy Agency estimates that since 2011, the Chinese government and Chinese firms have invested over $50 billion in new solar production capacity, and China now accounts for over 80 percent of manufacturing at all stages of solar panels globally.

China’s manufacturing capacity in semiconductors is expected to more than double in five to seven years, according to Barclays’ analysis of Chinese manufacturers’ development plans, potentially leading to an over-supply in the market as early as 2026. The International Energy Agency (IEA) reports that China is the dominant producer and processor of critical minerals essential to the net-zero transition, processing over half of all lithium, cobalt, graphite, and rare earth elements.