Ottawa considers imposing a surcharge on Chinese electric vehicles

Photo: Adrian Wyld The Canadian Press Federal Finance Minister Chrystia Freeland

Mia Rabson – The Canadian Press in Ottawa

Published at 11:29 a.m. Updated at 1:23 p.m.

• Canada

Federal Finance Minister Chrystia Freeland said Monday that Ottawa is studying the possibility of imposing a surtax on imports of electric vehicles manufactured in China.

A consultation 30-day discussion on the issue will begin July 2 to counter what Ms. Freeland sees as a clear effort by Chinese companies to generate global oversupply.

Canada's decision comes weeks after the United States and the European Commission announced plans to impose higher import tariffs on Chinese electric vehicles this summer.

The consultation will aim to determine what is driving China's boom in electric vehicle exports, including unfair market practices as well as labor and environmental standards.

In addition to a surcharge, the consultation will examine whether Canada should modify which cars qualify for the zero-emission vehicle incentive program, worth up to $5,000 per vehicle.

The possibility of expanding investment restrictions in Canada will also be examined.

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In 2021, nearly 80% of all lithium-ion batteries for electric vehicles worldwide came from China. The International Energy Agency says nearly 60% of electric vehicles sold globally are now made in China.

US and EU response

Accusations that China boosted its own electric vehicle industry through unfair subsidies have led Europe and the United States to fight back, this spring.

US President Joe Biden announced in mid-May that he would increase tariffs on Chinese electric vehicles this year from 25% to 100%, although there is only one Chinese electric vehicle currently available in the United States.

Mr. Biden also announced increased tariffs on lithium-ion batteries and some other clean energy products, including solar cells.

The European Commission is still investigating China subsidies, but announced two weeks ago that it would impose interim tariffs of between 17% and 38% on Chinese-made electric vehicles starting July 4.

This plan could change, however, as Europe and China have agreed to begin negotiations on the issue over the weekend.

Chinese-made electric vehicles now represent 8% of the European market, compared to 1% in 2019. Europe argues that its preliminary findings confirmed that Chinese electric vehicles benefit from a “ unfair subsidy”.

Many Chinese electric vehicles are significantly less expensive than similar models made in Europe.

Since 2020, Canada has attracted more than $46 billion in investment for 13 projects to manufacture electric vehicles, batteries and battery components.

Ottawa and the provinces have jointly promised up to $53 billion in return, including in the form of tax credits, production subsidies and capital investments.