Canada must be tired of being caught between the world’s great powers. But the Biden administration Almost four times The tariffs are enormous 102.5% When it comes to importing electric vehicles from China, the Trudeau government may be forced to choose between provoking a trade war with China or alienating one of its biggest ally.
US tariff hikes on Chinese EVs package Here’s a list of trade measures the Biden administration is imposing on its rivals, including those affecting steel, aluminum, solar, semiconductors and batteries, as the administration seeks to protect U.S. workers from “unfair Chinese trade practices related to technology transfer, intellectual property, and innovation.”
Subsidy wars
president Joe Biden China claims that its government is flooding the market with subsidized “artificially low-priced exports,” which is true, but the U.S. and Canada are in the subsidy game, too.
White House to raise $7,500 for consumers in 2022 Tax Credit For US-made EVs covered by the Inflation Control Act Also It has poured money into EV charging infrastructure and EV battery manufacturing. In March, China World Trade Organization The United States, the Inflation Control Act, and its lawsuit against “discriminatory subsidies.”
Meanwhile, Canada has imposed a 6% tariff on Chinese-made EVs. $5,000 Discount In addition to support from Ontario, the federal government recently$30 billion Stellantis, Volkswagen and another CA battery factory deal$5 billion Honda plans to build four EV factories in Ontario in an effort to build a domestic industry and supply chain.
The fight against China over EVs is complicated, and Biden and Justin Trudeau He voices concerns about jobs, economic growth, supply chain integrity and national security, and is certainly thinking about his own political future ahead of the upcoming election.
Currently, China’s EVs 60% The percentage of zero-emission vehicle sales in the world is we None of them are made in Canada by Chinese manufacturers, but other manufacturers are building EVs in China and selling them in the US. Volvo EX30.
Tesla, which accounts for about a third of EVs sold in Canada in 2023, has begun producing Canadian EVs in China. Add value The share of EVs in the Chinese import market grew from CAD 84 million to CAD 2.2 billion, and China is now looking to expand the presence of EVs in both countries, including with its own domestic brands.
The shift to EVs is coming – and it’s political
EV sales have recently Soaked In the United States CanadaBut the Biden administration remains half By 2030, 70% of new car sales are expected to be electric vehicles, while in Canada Mandate All new passenger vehicle sales must be electric by 2035. The market for these cars and trucks is sure to keep growing as prices fall, manufacturers open stores, and charging infrastructure expands.
Both leaders are concerned that China will be the biggest beneficiary of the EV transition at the expense of its domestic industry and workers. So an EV policy may be inevitable, and for good reason. In Canada, auto manufacturing is 135,000 direct workers, 500,000 indirect workers Most of them are employed in Ontario, Canada’s most populous and most constituency-rich province, with a GDP of C$16 billion.
In the United States, the numbers — and the risks — are even higher. Over 4.4 million Americans work in auto manufacturing and retail, and about six million more are indirectly employed by these industries. 3% of GDP.
Graham Thompson, senior analyst for global macro geopolitics at Eurasia Group, said the Biden administration’s political calculations are clear on this issue, with tariffs not just on EVs but also on steel, aluminum and other goods driven at least in part by domestic political concerns.
“This is classic American protectionism against domestic manufacturing,” he said, adding that it’s no coincidence that we’re seeing this in an election year.
“Joe Biden’s path to the presidency is likely to go through Wisconsin, Michigan and Pennsylvania,” he said — manufacturing powerhouses. And Biden may not be the only one thinking politically about this conundrum.
Speaking to reporters Speaking after a visit to the Service Employees International Union’s international convention in Philadelphia, Trudeau said he was “watching very closely what the United States is doing” regarding the China tariffs.
Canada is currentlyIn consideration of The Chinese government has said it will take “all measures,” including higher tariffs, to better harmonize its trade policies and electric vehicle industry with the U.S. while protecting its own auto industry and workers. The government has not made any promises, but pressure to act is growing.
Not necessarily tariffs, but tariffs if necessary
Canada’s auto industry is calling on the federal government to be prepared to match Biden’s tariffs.
Brian Kingston, president of the Canadian Automobile Manufacturers Association, said Canada should be prepared if a large number of subsidized Chinese-made EVs hit the market.
“We don’t need to react right now and raise tariffs, but we know what’s coming, so let’s make sure our defenses are well prepared if and when that happens,” he said.
Such a stance would protect Canadian industry from the negative effects of not aligning with the United States, he argues.
“Canada’s auto industry has been and continues to be fully integrated with the United States,” he said. “Companies invest and build in Canada because we have regulatory alignment with the United States. But our success depends on maintaining that alignment and preserving preferential access to the U.S. market through the USMCA.”
He also argues that Canada should scrap its EV mandate until 2035.
Kingston said the plan “does not take into account where the EVs will be manufactured or whether the North American supply chain is developed enough to meet the targets set,” adding that the US is not mandating hard targets but is “linking environmental policy with industrial policy.”
Catch it on the way
China is Canada It is the second largest Canada is the second largest trading partner after the United States, but this fact is misleading: in 2023, 78% of Canadian exports were to the United States and roughly half of imports were from the United States, with a total merchandise value of more than $770 billion. $64 billion A trade war with China could be costly for Canada and its exports, but it would pale in comparison to the actions the United States could take if an ally goes too far. Donald Trump Won in November.
Thompson said Canada will have to face the consequences if Chinese-made EVs flood the market.
“If Chinese-made EVs start washing up on Canadian shores, we’re going to see some pressure from the U.S.,” he said, which could invite U.S. retaliation.
“You can imagine that it might come up in the context of a review or renegotiation of USMCA,” he added.
Despite Canada’s dilemma, it may have little choice but to follow the U.S. lead.
“Canada is in between these two great powers,” Thompson said, “but at the end of the day, whether it’s economics and trade or defence and national security, Canada has so many interests on the U.S. side that it doesn’t have much of a choice.”
