Canada Implements New Trade Measures to Counter Unfair Chinese Trade Practices

The stringent measures reflect Canada’s commitment to levelling the playing field for its workers and industries and responding to unfair Chinese trade practices.

The Canadian government is implementing new trade measures starting in October to protect its workers and key industries from unfair Chinese trade practices, particularly in the electric vehicle (EV), steel, and aluminum sectors.

These stringent measures are designed to address overcapacity issues and unfair competition from China. These include poor labour standards, a lack of environmental protections, and trade policies supporting oversupply.

Deputy Prime Minister and Finance Minister Chrystia Freeland announced these new trade measures last week during a press conference in Halifax, where she highlighted the importance of supporting Canadian workers.

“Our government is moving forward with decisive action to level the playing field, protect Canadian workers, and match measures taken by key trading partners,” said Freeland during the press conference.

Similarly, Minister of Transport Pablo Rodriguez underscored the importance of the new trade measures during the press conference, saying, “The path to net-zero emissions won’t be achieved without Canadian workers. Today’s announcement ensures that our programs protect our workers, critical sectors, and Canada’s economy.”

Minister of Export Promotion, International Trade and Economic Development Mary Ng also emphasized the need for decisive action. “Global trade rules are not always adequate to protect against the type of non-market behaviour we have witnessed from China in this sector,” she said.

What are the new trade measures Canada is taking?

To counter the threat posed by Chinese trade practices, the Canadian government is implementing the following new trade measures:

1. 100% surtax on Chinese electric vehicles (EVs): Starting October 1, 2024, all Chinese-made EVs, including electric and hybrid vehicles, will be subject to a 100% surtax in addition to the existing 6.1% tariff.
   
   
2. 25% surtax on Chinese steel and aluminum products: Starting October 15, 2024, a 25% surtax will be applied to steel and aluminum imports from China. The final list of goods subject to this surtax will be published by October 1, 2024.

3. Consultation on other key sectors: The government will launch a 30-day consultation to assess additional measures for other key industries, including batteries, semiconductors, solar products, and minerals.

4. Limiting zero-emission vehicle (ZEV) incentives: The government plans to restrict eligibility for the Incentives for Zero-Emission Vehicles (iZEV), the Incentives for Medium and Heavy Duty Zero Emission Vehicles (iMHZEV), and the Zero Emission Vehicle Infrastructure Program (ZEVIP) to products manufactured in countries with free trade agreements with Canada.

The government intends to review these new trade measures within a year of implementation and may extend or expand them if necessary.  

Why Canada is taking these measures

With these new trade measures, the Canadian government aims to:

• Support Canada’s EV industry, which ranks first globally in supply chain potential.
• Protect Canadian jobs and allow domestic producers to compete on fairer terms with Chinese manufacturers.
• Safeguard more than 130,000 Canadian jobs in the steel and aluminum sectors.
• Ensure the government’s green initiatives align with its commitment to protecting Canadian jobs and industries.

Global trade concerns about Chinese trade practices

In 2023, China exported $1.6 billion worth of electric vehicles to Canada. With the support of extensive state subsidies, the country has become the world’s largest manufacturer and exporter of EVs since 2020.

The new Canadian trade measures are part of a broader global response to Chinese state subsidies and unfair trade practices. The United States and the European Union have recently taken steps to address China’s dominance in various sectors.

On May 14, 2024, the U.S. announced a 100% tariff on Chinese EVs and hybrids under Section 301. Similarly, on June 12, 2024, the European Commission imposed provisional countervailing duties on Chinese-made EVs and is conducting further investigations into unfair subsidies.

China’s overcapacity in steel and aluminum production has also been a significant concern. Since 2018, China has increased its steelmaking capacity by over 18.6 million metric tonnes, more than Canada’s total production capacity.

Moreover, China’s primary aluminum capacity has grown from 11% to 59% of global production over the past two decades, threatening Canada’s steel and aluminum industries.

How the new trade measures support Canada’s future

The Canadian government is committed to protecting its workers and keeping its industries competitive. Minister of Innovation, Science, and Industry François-Philippe Champagne stated, “This is about securing the fair, prosperous future Canadians deserve.”

The auto sector, which supports nearly 550,000 direct and indirect jobs, is critical to Canada’s economy. The new trade measures are designed to safeguard these jobs and help Canada remain a global leader in transitioning to a green economy.

Please reach out to one of our trade professionals for more information about how these new trade measures could affect your import business.