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In a dramatic move that echoes similar moves by many other countries, Canada has announced it will impose a 100% tariff on (EV) electric vehicles made in China. The sweeping measure is set to take effect on October 1, and is intended to combat what Ottawa calls “unfair competition” and trade practices stemming from China’s heavy subsidies for its electric vehicle industry.

Details

The new tariff follows the lead of the United States and the European Union, which have already imposed significant taxes on Chinese-made EV. The Canadian government argues that the tariffs are necessary to protect its domestic industry from being undermined by what it sees as predatory pricing and unfair subsidies that distort market dynamics.

Canada’s tariffs on Chinese-made electric vehicles are currently 6.1%, but the upcoming increase is aimed at providing greater protection for local manufacturers. The move also applies to Chinese-made steel and aluminum, which will face a 25% tariff starting Oct. 15. The additional measure targets a sector in which China is a major player, being Canada’s third-largest source of steel imports.

The Canadian Finance Department’s rationale is based on leveling the playing field for Canadian workers and ensuring fair competition for local manufacturers in the electric vehicle, steel, and aluminum sectors. By imposing these tariffs, Canada hopes to limit the competitive advantage that heavily subsidized Chinese exports can have, thereby strengthening the ability of its own industries to compete both domestically and internationally.

The strategy comes amid a wider trade spat. The Biden administration announced a similar 100% tariff on Chinese electric vehicles earlier in May, and the European Union followed suit with its own set of increased tariffs, though it has recently adjusted its stance on certain models, including Tesla vehicles.

Experts’ Forecasts

Vincent Chan, China strategist at Aletheia Capital, weighed in, suggesting that while the tariffs could impact China’s momentum in the EV market, they are unlikely to halt its growth trajectory entirely. As Canada prepares to review the measures a year after they were introduced, the international community is watching closely to see how the tariffs will change the global auto and steel market.