On August 26, 2024, Canadian Prime Minister Justin Trudeau announced Canada’s decision to impose a 100 percent tariff on imported Chinese electric vehicles (EVs) starting October 1, 2024. Alongside a 25% tariff on Chinese steel and aluminum imports effective October 15, 2024, following the United States (US) and the European Union (EU) lead. Although the increase is significant, Canada already levies a 6.1% tariff on Chinese-manufactured EVs. Tariffs give a “price advantage to locally-produced goods over similar goods which are imported” and raise revenues for governments. The Canadian government defends these measures as necessary for safeguarding domestic industries against economic threats. Specifically, Canada argues that the EV, steel, and aluminum industries face unfair competition and trade practices from China, echoing similar concerns previously voiced by the US and the EU. Additionally, Canada contends that these tariffs will bolster domestic and global competitiveness for its EV, steel, and aluminum sectors.
Yet, a crucial question arises: is this policy sustainable and viable in the long term? This decision has sparked considerable debate, with many environmentalists and scholars arguing that tariffs may fail to foster a robust domestic EV industry. Critics note that Chinese EVs are technologically advanced and competitively priced, which could place Canadian legacy carmakers at a perpetual disadvantage. Mike Colias, a Wall Street Journal reporter in Detroit, reports that even Ford Motor’s CEO, Jim Farley, acknowledges that Chinese EV manufacturers employ artificial intelligence and other technologies “unlike anything seen” in North American markets.
Professors Anton Malkin and Philippe Rheault from the University of Alberta suggest that these tariffs may increase EV costs, limit consumer choices, and hinder EV adoption in Canada despite government incentives. They propose that instead of resorting to punitive tariffs, Canada might have better positioned itself by incentivizing Chinese EV firms to localize production in North America. This strategy, they argue, would strengthen Canada’s industry, advance its environmental and economic goals, and better support the target of 100% zero-emission auto sales by 2035.
Deputy Prime Minister and Finance Minister Chrystia Freeland contend that the tariffs counter China’s “state-directed policy of overcapacity,“ which she claims lacks adequate labour and environmental regulations. This overcapacity, she argues, drives down costs and threatens Canadian industries and the automotive workforce by enabling low-cost Chinese EVs to flood global markets. However, Freeland’s stance on ‘unfairness‘ raises questions, as these tariffs may conflict with World Trade Organization (WTO) rules. On September 6, 2024, China formally requested WTO consultations with Canada, alleging that Canada’s tariffs disregard fair trade practices stipulated by international trade agreements. While China’s practices may appear unfair to Canada, they technically adhere to WTO standards.
Furthermore, environmentalists and green economists caution that these tariffs will likely impose significant costs on Canadian consumers, potentially adding tens of thousands of dollars to the price of purchasing or owning an EV. This price increase –and, therefore, slower adoption of EVs– could hinder the transition to cleaner energy, adding to the climate’s carbon burden. Indeed, skeptics argue that these tariffs may ultimately fail to foster a competitive domestic EV industry.
In conclusion, Chinese EVs’ combination of advanced technology and affordability poses a significant challenge to North American manufacturers, who may struggle to compete on both innovation and price. As the global EV landscape continues to evolve drastically, the question remains: will North American companies adapt quickly enough to remain competitive, or will they be left behind in the race for dominance in the green economy?
Edited by Alexandra MacNaughton
This is an article written by a Staff Writer. Catalyst is a student-led platform that fosters engagement with global issues from a learning perspective. The opinions expressed above do not necessarily reflect the views of the publication.
Kirit Ghumman is in her second year at McGill University, currently pursuing a B.A. in Political Science with a minor in International Development Studies. As this year’s Staff Writer for Catalyst, Kirit is determined in analyzing the complex intersections of international politics and development issues. With a keen focus on immigration, refugee law, and statelessness, Kirit’s writing delves into how international politics shape vulnerable communities, shedding light on the challenges and injustices they face. At Catalyst, Kirit aims to provide nuanced, well-researched insights into how shifting power dynamics impact the marginalized, especially through a lens of justice and human rights.