Canada Slaps 100% Tariff on Chinese Electric Vehicles

Canada announced a 100% tariff on Chinese electric vehicle imports and a 25% tariff on imported steel and aluminum from China. This move aligns with similar actions by the U.S. and EU, aiming to counter China's over-capacity policies. The tariffs and potential further measures are part of wider efforts to fortify Canada’s EV supply chain.

Canada has followed the United States and European Union by imposing a 100% tariff on imports of Chinese electric vehicles, the government announced on Monday. Additionally, a 25% tariff will be placed on imported steel and aluminum from China, affecting EVs made by Tesla among others, according to a Canadian official.

The announcement negatively impacted shares of Tesla, which closed down 3.2%. Canadian imports of automobiles from China surged 460% in 2023 year over year, driven by Tesla's shipment of Shanghai-made EVs to Canada's largest port, Vancouver.

Prime Minister Justin Trudeau stated the measure is a response to China's deliberate strategy of over-capacity. He emphasized the importance of aligning this move with other global economies, during a press briefing at a cabinet meeting in Halifax, Nova Scotia. The tariffs will take effect on October 1.

The Chinese embassy in Ottawa was not available for comment. China remains Canada's second-largest trading partner, lagging significantly behind the United States.

Tesla does not publicize its Chinese exports to Canada. However, vehicle identification codes indicate the Model 3 and Model Y are being shipped from Shanghai. "The 100% surtax applies to all Chinese-made EVs. If manufacturers relocate production out of China, they would be exempt from this tariff," explained the official.

Tesla did not respond to requests for comment. Morningstar equity strategist Seth Goldstein suggested Tesla might shift logistics to export from the U.S. to Canada, which could impact profitability due to higher U.S. production costs.

The European Union also adjusted its stance, recently imposing a 9% tariff on Tesla's Chinese-imported EVs, down from a previous rate of up to 36.3% on other Chinese-made EVs.

Prime Minister Trudeau indicated that Canada will continue working with international allies to counter unfair market practices. Potential further tariffs on chips and solar cells are also under consideration.

President Joe Biden in May increased U.S. tariffs on Chinese EVs to 100% and raised duties on semiconductors and solar cells to 50%, along with new 25% tariffs on various strategic goods, to protect domestic industries against Chinese excess production. Canada aims to solidify its position in the global EV supply chain, under pressure from domestic industries to act against China.

Canada has secured multi-billion-dollar deals with top European automakers to strengthen its EV supply chain. "We feel vindicated and motivated," stated Flavio Volpe, president of the Automotive Parts Manufacturers' Association. The U.S. has delayed the implementation of its tariffs until September, with a possibility of modification this week.

(With inputs from agencies.)