Canada imposes 100% tariff on Chinese EVs including Tesla

Canada announced on Monday its decision to impose a 100% tariff on electric vehicles (EVs) imported from China, including those manufactured by Tesla. The Canadian government also declared a 25% tariff on imported steel and aluminium from China, marking a substantial shift in trade policy.

Prime Minister Justin Trudeau justified the decision, stating that it was a response to what he described as China's "intentional, state-directed policy of over-capacity." The new tariffs are set to take effect on October 1, 2024, and will apply to all EVs shipped from China, regardless of the manufacturer.

The impact of this decision is expected to be significant, particularly given the recent surge in Chinese EV imports to Canada. Data shows that Canadian imports of automobiles from China through the port of Vancouver skyrocketed by 460% year-over-year in 2023, reaching 44,356 units. This dramatic increase coincided with Tesla's commencement of shipping Shanghai-made EVs to Canada.

Trudeau emphasised the importance of international alignment in this decision, stating, "What is important about this is we're doing it in alignment and in parallel with other economies around the world." This move follows similar actions by the United States, where President Joe Biden announced a quadrupling of tariffs on Chinese EVs to 100% in May, along with increased duties on semiconductors and other strategic goods.

The Canadian government official clarified that while the tariff applies to all Chinese-made EVs, companies could avoid the duty by moving their production to different countries. This leaves room for manufacturers like Tesla to adjust their strategies to maintain competitiveness in the Canadian market.

China's response to Canada's announcement was swift and critical. A spokesperson for China's Commerce Ministry stated that Canada's move "will disrupt the stability of global industrial and supply chains" and "seriously undermine the global economic system and economic and trade rules." The spokesperson accused Canada of violating World Trade Organization (WTO) rules and engaging in "typical trade protectionism."

The impact on Tesla, the world's most valuable automaker, was immediate, with its shares closing down 3.2% following the announcement. Analysts suggest that Tesla might shift its logistics to export vehicles to Canada from its U.S. production facilities in response to the tariffs.

Canada's decision is part of a broader strategy to position itself as a critical player in the global EV supply chain. The country has recently signed deals worth billions of dollars to attract top European automakers across various segments of the EV industry. Flavio Volpe, president of the Automotive Parts Manufacturers' Association, expressed support for the government's action, stating, "We feel vindicated and motivated. Let's now get to the business of defending our market with the best of Canadian innovation and resolve."

Trudeau hinted at the possibility of further punitive measures, such as tariffs on chips and solar cells, though details were not provided. The Prime Minister also emphasised the continued collaboration with the United States and other allies to address what they perceive as unfair trade practices by countries like China.