A drone view shows BYD electric vehicles before they are loaded onto the BYD Explorer No.1 roll-on, roll-off vehicle carrier for export to Brazil, at the port of Lianyungang in Jiangsu province, China, on April 25.China Daily CDIC/Reuters
The federal government has said it will soon announce whether it intends to match the crippling tariffs recently imposed by the United States on electric vehicles and associated parts imported from China.
Matching the American tariffs would be the right decision, even though such tariffs are usually a bad idea.
On its face, there are good reasons to welcome Chinese EVs into Canada. Through some combination of government subsidies and lower labour costs, Chinese EVs can be far less expensive than their North American competitors.
One manufacturer, BYD, offers a small electric vehicle, the Seagull, that sells in China for the equivalent of $14,000, a small fraction of the cheapest current offering in Canada. Though the Seagull would have to be upgraded to meet Canadian safety and quality standards, it’s clear that Chinese EVs could transform, and even dominate, the Canadian market.
Consumers cite cost of EVs (along with range and charging limitations) as a deterrent. If Canadians could buy reliable EVs at a price competitive with internal combustion vehicles, more might make the switch, which would help in the fight against global warming.
Road passenger transport accounts for about 12 per cent of Canada’s greenhouse-gas emissions. That’s as much as the entire oil sands.
As a general rule, tariffs are a bad thing. The ever-lower tariffs that have powered global trade since the founding of the World Trade Organization in the mid-1990s helped slash the share of the global population living in extreme poverty from 40 per cent to 10 per cent.
But the United States is becoming increasingly protectionist, especially toward China, which it sees as an economic and geopolitical rival.
After the Biden administration increased the duty on Chinese EV imports to 100 per cent in May, the Liberal government launched a brief period of consultation, which wrapped up at the end of July. Conservative Leader Pierre Poilievre is calling on the government to match the U.S. tariff. There are compelling reasons to do so.
The Chinese government heavily subsidizes the EV sector. If Beijing’s goal is to dump product into foreign markets in the hopes of controlling these markets, then that strategy must be deterred.
There is strong evidence that some of the materials used to make the Chinese vehicles have been produced by forced Uyghur labour in Xinjiang province.
The vehicles come with sophisticated computer systems that could transmit valuable data back to China.
The European Union this week provided further detail on its decision to impose higher tariffs on EVs made in China, though Europe’s are not as punitive as the American rates.
Finally and foremost, Canada simply can’t allow itself to be offside with the Americans on this issue. One reason federal and provincial governments have invested $52-billion and counting in new EV-related facilities is to maintain a fully integrated North American auto sector.
The United States-Mexico-Canada Agreement that replaced the North American Free Trade Agreement is up for review in 2026. Differing tariffs between Canada and the United States on Chinese EV imports must not become an irritant in those talks.
The United States and Canada conduct almost $1-trillion in trade annually. Sino-Canadian trade is valued at $120-billion. Any tariff on Canadians exports into the United States harms the Canadian economy. Tariffs in the auto sector would be devastating.
Of course, if Canada matches the U.S. in imposing prohibitive tariffs on Chinese EVs and parts, China will doubtless respond with counter tariffs. Canadian agricultural exports to China could be seriously impaired.
That is why trade wars should in general be avoided. In the long run, no one wins.
The day may come when China trades freely with the United States in EVs and other products, meaning Canada is able to do so as well.
That would be a happy day, for it would mark the lessening of tensions between the two superpowers. But until that day, Canada must stand with the United States. Such a stand aligns with our democratic values. It also aligns with our economic interests, even if it means people have to pay a great deal more if they want to go electric.