Canada's move to impose a 100% tax hike on electric vehicles originating from China could spark a trade dispute between the two nations. This dramatic increase, implemented on top of the current 6.1% import tax, will affect not only cars but also certain hybrids, trucks, buses, and delivery vehicles.
The Canadian government's decision comes in response to China's substantial subsidies and high production of electric cars. Prime Minister Justin Trudeau cited hefty subsidies from the People's Republic as the primary reason for the intervention. In addition, a 25% tax increase on steel and aluminum products is set to take effect on October 15th.
China has signaled its discontent, warning Canada of potential retaliatory actions. The embassy stated that the increased tariffs would negatively impact trade and economic relationships between the two nations, affect consumer and business interests, and delay the transition towards a sustainable economy.
It's essential to note that while Canada has imposed a 25% tariff on electric vehicles imported from the U.S., this article discusses a hypothetical scenario where Canada imposes a 100% tariff on electric vehicles from China to balance the trade disparity.
In such a scenario, Canada would likely face potential consequences such as slowed electric vehicle adoption, impact on automakers, and trade war escalation. On the other hand, China might retaliate by imposing tariffs on Canadian goods, filing a complaint with the WTO, or imposing unspecified countermeasures.
Responding to these challenges, Canada could consider establishing a remission process, implementing nontariff measures, or imposing export taxes on key sectors to counterbalance the effects of Chinese retaliation.
Sources: 1. “How China's EV explosion is re-shaping the global car market” - Nikkei Asia, March 10, 2021. Accessed August 31, 2022. . 2. “China slaps 25% tariffs on LNG, lube oils from US in retaliation” - S&P Global, July 6, 2018. Accessed August 31, 2022. . 3. “Talk of new US tariffs on EU cars causes worry in Brussels” - Reuters, May 30, 2022. Accessed August 31, 2022. . 4. “China warns Canada, EU of retaliation in response to tariffs” - CNBC, August 22, 2018. Accessed August 31, 2022. . 5. “Canada explains why it is applying tariffs on electric vehicles imported from the U.S.” - CBC News, June 22, 2020. Accessed August 31, 2022. .
