Beijing has vowed to take all necessary measures to protect the interests of Chinese companies after Canada announced its plan to impose tariffs on electric vehicles (EVs) and steel and aluminum products produced in China.
Canadian Prime Minister Justin Trudeau said Monday Canada will place a 100% tariff on imports of China-made EVs from October 1 and a 25% tariff on Chinese steel and aluminum, starting from October 15.
“We are transforming Canada’s automotive sector to be a global leader in building the vehicles of tomorrow,” Trudeau said. “But actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian autos and metal workers.”
“Subsidies do not generate industrial competitiveness while protectionism protects nothing but backwardness. Future development will be sacrificed,” Lin Jian, a spokesperson of the Chinese Foreign Ministry, said in a media briefing on Tuesday.
“The rapid development of China’s EV industry is the result of persistent tech innovation, well-established industrial and supply chains, and full market competition,” he said. “This is what happens when our comparative advantages provide exactly what the market needs.”
He said China deplores and opposes the move made by the Canadian side as it ignores facts, disrespects WTO rules, and runs counter to historical trends.
He said this typical protectionist move disrupts China-Canada trade relations, harms the interests of Canadian companies and consumers, and does little good to Canada’s green transition process and global effort for climate response.
Some commentators said Canada’s tariff actions will only affect the imports of Tesla EVs from China as major Chinese EV brands have not yet entered the Canadian market. They said big Chinese EV makers such as BYD originally planned to ship products to Canada in 2025 but they will now have to consider setting up factories in Canada to avoid new tariffs.
Impact on Tesla
According to Automotive News Canada, Tesla sold 36,900 EVs in Canada last year, compared with 24,400 in 2022. The company, whose CEO is entrepreneur Elon Musk, is now supplying Canada with its EVs made in Shanghai but it can avoid the new tariffs by switching to supplying Canada from factories in Germany or the US.
Liu Chunsheng, an associate professor at the Beijing-based Central University of Finance and Economics, told the China News Agency that Canada’s EV tariffs will not hurt Chinese firms directly but could force Tesla to reduce production in China.
“The major destinations of Chinese EVs are not the US and Canada, but Southeast Asia, Eastern Europe and some Belt and Road countries,” Liu said. “Canada’s tariffs will not hurt the exports of Chinese EVs.”
”However, we must beware that the US is now encouraging its allies to reduce or block the imports of Chinese EVs. Canada’s tariffs will become a showcase and affect other countries’ decisions,” he said. “Besides, Tesla may be forced to reduce its production in China.”
Tesla said in March this year that it had reduced its car production in China due to slow demand and strong competition in the market. Reuters then reported, in May, that Tesla’s Model Y production in Shanghai was 49,498 units in March and 36,610 units in April – down 17.7% and 33% year-on-year, respectively.
The Shanghai factory is Tesla’s largest production facility in the world with an annual capacity of about one million vehicles.
BYD’s plan
In May, the Biden administration raised the United States’ tariff on imports of Chinese EVs from 25% to 100%. In July, it imposed a 25% tariff on steel products and a 10% tariff on aluminum products originating from China via Mexico.
Mexico has yet to raise tariffs on Chinese EVs, but it has stopped providing incentives such as tax cuts or low-cost land for EV production, which benefited Chinese automakers in the past, since April.
In early July, the European Union imposed 17-38% tariffs on Chinese EVs but analysts said Chinese EV firms have a cost advantage and can absorb the EU’s newly imposed tariffs.
Currently, BYD has been selling electric buses and trucks in Canada. The Shenzhen-based company reportedly has plans to sell passenger EVs to Canada, initially through retail in 2025, and then a rideshare program with Uber.
On July 31, Uber and BYD announced a multi-year strategic partnership designed to bring 100,000 new BYD EVs onto the Uber platform across key global markets. The announcement said the partnership would begin in Europe and Latin America, and then would expand to the Middle East, Canada, Australia and New Zealand.
The Financial Times reported last month that the United Kingdom government is not immediately planning to follow the EU lead in investigating China auto industry subsidies or imposing new tariffs on Chinese EVs.
Australia also has not imposed additional tariffs on Chinese EVs. Over the past 15 years, more than 550,000 China-made vehicles have been sold in Australia, media reports said.
Read: China EVs still driving for EU’s protected markets
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