An investigation into China’s EV market practices is taking place to address concerns about unfair subsidies and their impact on the Canadian auto industry.
Canada is considering imposing higher import tariffs on Chinese-made electric vehicles (EVs). Starting July 2, a 30-day consultation period will investigate China's EV market practices. The consultation will assess the economic impact on Canada, as well as national security risks and environmental, labor, and human rights standards.
This move follows similar actions by the United States, which announced a new 100% import tariff on Chinese-made electric vehicles starting in August. Doug Ford, the Premier of Ontario, Canada’s most populous province, has also called for a 100% import tariff to protect car production jobs in the country.
The investigation of China’s EV market practices is being conducted under section 53 of the Customs Tariff Act, which permits the imposition of a surtax on imported goods in response to practices that harm Canada’s industry.
During her speech at an auto parts manufacturing plant in Vaughan, Ontario, Finance Minister Chrystia Freeland emphasized that China has intentionally created overcapacity and oversupply and exported these excess products to other countries, which she claims violates global trade rules.
“That is actually not playing by the global trade rules and Canada will not stand for that,” Freeland stated.
Freeland also mentioned that the scope of the potential response could extend beyond EVs to include other components of the EV supply chain, such as batteries.
Over the past four years, Canada has made significant investments in its auto sector to establish itself as a global leader in the EV supply chain.
Since October 2020, companies have committed $46 billion to 13 different EV plants, battery factories, and battery precursor production sites. The Canadian government and provincial authorities have supported these projects with up to $53 billion in tax credits, production subsidies, and capital investments.
Currently, the only Chinese-made electric vehicles imported into Canada are Tesla models manufactured at the company’s Shanghai factory.
Under current regulations, Chinese EV imports to Canada are subject to a 6% import tariff. Canadians can benefit from up to $5,000 toward the purchase of a fully electric or plug-in hybrid electric vehicle from the federal government, with additional incentives from provincial governments.
Concerns about the potential influx of cheap Chinese EVs have been raised, which could undermine efforts to rebuild and grow a strong national auto industry in Canada.
Unifor president Lana Payne expressed support for the move to increase import tariffs, highlighting the risk that low-cost EV imports from China pose to Canada’s auto industry.
David Adams, president of Global Automakers of Canada, also backed the government’s initiative, emphasizing the importance of a level playing field for the sector.
Conservative trade critic Kyle Seeback reiterated his party’s priority to protect Canadian manufacturing jobs, opposing the dumping of cheap Chinese products that threaten local employment.
China currently dominates the global EV market, producing about 70% of EV batteries and 60% of EVs. Last fall, following a rapid increase in Chinese market share in Europe, the European Commission launched an anti-subsidy investigation of Chinese EVs. Europe plans to impose a surtax on Chinese imports, ranging from 17.4% to 38.1%, starting July 4, although ongoing negotiations may affect this timeline.
As Canada progresses with its consultation process, stakeholders—including automakers and industry representatives—will provide input on the proposed measures.
The outcome of this investigation could lead to significant changes in the import landscape for Chinese-made electric vehicles and related components, which will impact both the domestic market and international trade relations.
If you import Chinese-made EVs into Canada, please reach out to one of our trade professionals to discuss how an increase in tariffs could affect your business.