Should Canada ease its 100% tariff on electric vehicles from China amid trade war with U.S.? Majority of folks and experts alike support the move, while automakers worry about flooding market, which is understandable since capitalism is all about… Profit, Baby, Profit

Should Canada ease its 100% tariff on electric vehicles from China amid trade war with U.S.?

Some economists support the move, while automakers worry about flooding market

Canada’s trade war with the United States has some economists pondering whether the federal government should ease or lift its 100 per cent tariff on Chinese electric vehicles, a move some say could spur EV purchases and deliver a blow to Elon Musk’s Tesla.

Automakers, however, say the tariffs are critical to protecting this country’s nascent EV industry.

Canada followed the U.S. in slapping the tariffs on Chinese EVs last fall, while also putting a 25 per cent surtax on imports of steel and aluminum products from China.

That was before Donald Trump became U.S. president and hit Canada with a storm of tariffs, including on steel and aluminum used in vehicle manufacturing.

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Public opinion has also soured on Trump adviser and tech billionaire Musk, whose Teslas are the top-selling EVs in Canada. Politicians have mused about targeted actions against Tesla, with NDP Leader Jagmeet Singh and former Liberal leadership candidate Chrystia Freeland both pitching 100 per cent tariffs on the vehicles.

Julian Karaguesian, an economist and lecturer at McGill University in Montreal, said it’s time to rethink the tariffs on China.

“I do think quietly, we’re thinking about easing some of those measures. And I actually think we should,” he said.

“If we wanted to have a targeted response to the Trump administration into his biggest financial supporter, we don’t have to tariff Tesla or American EVs…. We would just have to take off the tariff on the Chinese.”

Here are expert opinions aggregated by Canuck🍁AI:-

The question of whether Canada should ease its 100% tariff on electric vehicles (EVs) from China amid the ongoing trade tensions with the U.S. is complex and involves balancing economic, environmental, and geopolitical considerations. Here are some key points to consider:

Arguments for Easing the Tariff:

1. Economic Benefits for Consumers:
   • Lowering the tariff could reduce the price of EVs in Canada, making them more accessible to consumers and accelerating the adoption of environmentally friendly vehicles.
   • Increased competition could drive innovation and improve the quality of EVs available in the Canadian market.
2. Environmental Goals:
   • Canada has committed to reducing greenhouse gas emissions, and EVs play a crucial role in achieving these targets. Cheaper EVs could help Canada meet its climate goals faster.
3. Trade Diversification:
   • Reducing reliance on the U.S. for trade and diversifying trade partners, including China, could strengthen Canada’s economic resilience.
   • It could also position Canada as a more neutral player in the U.S.-China trade war, potentially opening up opportunities for other sectors.
4. Support from Economists:
   • Some economists argue that tariffs distort markets and that free trade generally benefits economies in the long run. Easing the tariff could align with these principles.

Arguments Against Easing the Tariff:

1. Impact on Domestic Automakers:
   • Canadian automakers and their U.S. counterparts are concerned that cheaper Chinese EVs could flood the market, undercutting domestic production and potentially leading to job losses.
   • The Canadian auto industry is closely tied to the U.S. market, and any move that could strain this relationship might have broader economic repercussions.
2. Geopolitical Considerations:
   • The U.S. and China are engaged in a broader trade and technological rivalry. Easing the tariff could be seen as aligning with China, potentially straining Canada’s relationship with the U.S.
   • The U.S. might respond with tariffs or other trade measures against Canadian goods, particularly in the auto sector.
3. Quality and Safety Concerns:
   • There may be concerns about the quality and safety standards of Chinese EVs, which could pose risks to consumers and require stricter regulatory oversight.
4. Strategic Industries:
   • The auto industry is often considered a strategic sector, and protecting it from foreign competition is seen by some as essential for national security and economic sovereignty.

Conclusion:

The decision to ease the 100% tariff on Chinese EVs involves weighing the potential benefits of lower prices and increased EV adoption against the risks to domestic industries and geopolitical relationships. Policymakers would need to carefully consider the long-term implications for Canada’s economy, environment, and international standing. A phased or conditional approach, such as reducing tariffs while implementing safeguards for domestic producers, might be a potential middle ground. However, any decision would likely require close consultation with stakeholders, including automakers, economists, and international partners.

Yet another perspective on the subject matter:-

Canada’s decision to impose a 100% tariff on Chinese-made electric vehicles (EVs) in October 2024 was primarily aimed at countering China’s subsidies, which were perceived to give its industries an unfair advantage. This move aligned with similar actions by the United States and the European Union, reflecting broader concerns about market imbalances and the potential flooding of domestic markets with low-cost Chinese EVs.

Economic Perspectives:

Some economists advocate for easing these tariffs, suggesting that reducing them could lower EV prices for Canadian consumers and accelerate the adoption of clean technologies. They argue that increased competition from Chinese manufacturers might stimulate innovation and efficiency within the domestic EV industry.

Automaker Concerns:

Conversely, Canadian automakers express apprehension that lifting the tariffs could lead to an influx of cheaper Chinese EVs, potentially undermining local manufacturers and threatening jobs. The Canadian Vehicle Manufacturers’ Association has highlighted the rapid growth of Chinese EV makers in markets like Europe and cautions about similar trends potentially affecting North America.

Trade Relations and Retaliation:

The imposition of these tariffs has strained trade relations, with China accusing Canada of protectionism and violating World Trade Organization rules. In retaliation, China has imposed duties on Canadian agricultural products, affecting over $2.6 billion worth of exports, thereby intensifying the trade dispute.

Conclusion:

The debate over easing tariffs on Chinese EVs involves balancing consumer interests, the competitiveness of domestic industries, and broader trade dynamics. While reducing tariffs could make EVs more affordable and support environmental goals, it also risks exposing Canadian manufacturers to heightened competition, potentially impacting local employment and economic stability. Policymakers must carefully weigh these factors to determine the most appropriate course of action.

Global Trade Tensions Escalate Amid Tariffs on Chinese Goods

• https://www.reuters.com/world/americas/canadian-farmers-face-two-front-trade-war-china-duties-take-effect-2025-03-20/
• https://www.theaustralian.com.au/world/australian-farmers-reap-benefits-in-china-as-beijing-strikes-america-canada-in-trade-war/news-story/87c985d7c93016f845767ad794554f64
• https://www.wsj.com/world/china/chinas-drive-for-global-ev-dominance-and-the-roadblocks-its-facing-in-charts-a609b398

Meanwhile, Canada’s tariffs have sparked retaliation from China, where officials called them discriminatory and said they “seriously violate World Trade Organization rules.”

Effective Thursday, China’s Ministry of Commerce has said it will apply a 100 per cent tariff on Canadian rapeseed oil, oil cakes and pea imports, and a 25 per cent duty on Canadian aquatic products and pork — causing major concerns for Canadian farmers.

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Karaguesian said Canada could build out its EV industry by inviting Indian and Chinese manufacturers, alongside American and European operators, to set up factories in Canada.

The idea of building a closer trade relationship with China is still somewhat taboo, he said, and some have been “aghast” when he’s suggested it. But he argues that Canada’s stance against China has largely been to appease the U.S.: “What business quarrels do we have with China that aren’t manufactured in Washington?”

It may be time to stop worrying about retaliation from Canada’s unpredictable southern neighbour, Karaguesian said, arguing that Trump and others in the U.S. government seem to view Canada more as a “vassal state” than a respected partner — a pattern he said emerged long before Trump took office.

“Let’s just be a sovereign nation, pursue our own best interests,” he said. “Because even when we do everything for them, it may not have any kind of reward at all.”

Kingston said he’s confident Canada will be able to produce competitively priced EVs if it’s given time to catch up to China.

“North Americans love to drive larger vehicles, pickup trucks and SUVs. You’re seeing electrified formats of those vehicles with increasingly large ranges,” he said. “So yes, the options to Canadians are getting better every single day, and prices over time will become increasingly competitive.”

So, overall is it more beneficial for Canada to remove the tariff?

It depends on what Canada prioritizes: affordability and environmental goals or protecting its domestic industry and jobs.

Reasons to Remove the Tariffs

✅ Cheaper EVs for Consumers – Lowering or removing tariffs would make electric vehicles more affordable, increasing adoption and helping Canada meet its climate goals.
✅ Greater Competition & Innovation – More competition from Chinese automakers could push domestic manufacturers to innovate and improve efficiency.
✅ Trade Relations with China – Reducing tariffs might ease tensions and reduce the risk of further retaliatory tariffs on Canadian exports like agriculture.

Reasons to Keep the Tariffs

❌ Protecting Domestic Industry – A flood of cheap Chinese EVs could hurt Canadian and North American automakers, leading to job losses.
❌ National Security & Supply Chain Risks – Heavy reliance on Chinese EVs and batteries could make Canada vulnerable to supply chain disruptions.
❌ Aligning with the U.S. – The U.S. has imposed similar tariffs, and if Canada removes them, it could create tensions with its closest trade partner.

Bottom Line

If Canada focuses on consumer affordability and climate goals, reducing the tariffs makes sense.
If the priority is protecting local jobs and industry, keeping the tariffs is the safer option.

A middle-ground approach could involve gradual tariff reductions or tariffs that decrease based on local EV production growth to balance both concerns.

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Canadian automakers back tariffs

Automakers in Canada have stood firmly in support of the tariffs on electric vehicles from China.

Canadian Vehicle Manufacturers’ Association president and CEO Brian Kingston said the tariffs on Chinese EVs were “absolutely” the right decision and that the challenge posed by U.S. tariffs on Canadian goods — which increase costs for consumers and threaten jobs in Canada’s auto industry — have only strengthened that case.

Canada has attracted more than $46 billion in EV investment since 2020, according to a June 2024 report from the Office of the Parliamentary Budget Officer, and Kingston said allowing Chinese EVs to flood the market would put those investments — and the development of the entire industry — at risk.

“China has capacity to build nearly 80 per cent of global vehicle demand. There is a huge risk if those vehicles were to flood the Canadian market,” he said.

David Adams, president and CEO of Global Automakers of Canada, said opening the doors to Chinese EVs now would render Canada’s investments in the sector pointless, because the Chinese vehicles would take over the market.

“The new tariffs from the U.S. certainly muddy the waters a little bit, but they don’t undermine the fundamental reason why those tariffs were put in place,” he said.

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Removing the 100% tariff on Chinese electric vehicles (EVs) could have significant negative impacts on Canadian automakers and the broader automotive industry. Here are the key ways in which the removal of tariffs could damage automakers:

1. Increased Competition & Market Flooding

🔻 Cheaper Chinese EVs could dominate the market – Chinese manufacturers like BYD, Nio, and XPeng produce EVs at lower costs due to government subsidies and economies of scale. If tariffs are lifted, their vehicles could flood the Canadian market, making it harder for domestic brands to compete on price.

🔻 Pressure on Canadian automakers to lower prices – Companies like General Motors, Ford, and Stellantis may struggle to match the low-cost Chinese models while maintaining profitability. This could force them to cut costs, possibly affecting quality, R&D investments, or wages.

2. Threat to Local Jobs

🔻 Potential factory closures and layoffs – If local automakers lose market share to cheaper imports, they may be forced to scale back production, leading to job losses in manufacturing plants and related industries.

🔻 Supply chain disruptions – Canada has been investing in building an EV battery supply chain. If Chinese imports dominate, Canadian battery and parts manufacturers could see reduced demand, affecting thousands of jobs.

3. Weakening of Domestic EV Industry

🔻 Discouraging investment in Canadian EV production – Automakers may be less willing to invest in Canadian EV manufacturing if they face overwhelming competition from low-cost Chinese imports. This could slow down the development of a strong, independent EV industry in Canada.

🔻 Dependence on Chinese supply chains – If Canada relies too heavily on Chinese EVs, it risks becoming dependent on a foreign country for its clean transportation future, which could be a national security concern.

4. Trade & Policy Conflicts with the U.S.

🔻 Strained trade relations with the U.S. – The U.S. has imposed similar tariffs on Chinese EVs. If Canada removes its tariffs while the U.S. keeps them, American automakers might pressure the Canadian government to maintain restrictions to ensure a level playing field in North America.

🔻 Risk of U.S. countermeasures – The U.S. could respond by imposing its own trade barriers on Canadian-made vehicles if it sees Canada as a gateway for Chinese EVs entering North America.

Final Impact

📉 Short-term effects – Canadian automakers could see declining sales, pressure to cut costs, and possible layoffs.
📉 Long-term effects – Canada’s EV industry could struggle to grow, and the country could become overly dependent on Chinese imports for clean transportation.

While removing tariffs might benefit consumers with lower prices, it could seriously harm Canadian automakers by undercutting their ability to compete, innovate, and sustain jobs.

Yet another expert input how will removal of the tariffs affects the automakers, not folks.

Here are the key ways in which the removal of tariffs could damage automakers:

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1. Increased Competition from Cheaper Imports

• Price Pressure: Chinese EVs are often more affordable due to lower production costs, government subsidies, and economies of scale. Removing the tariff would make these vehicles even cheaper, undercutting the prices of domestically produced EVs and traditional vehicles.
• Market Share Loss: Canadian automakers, particularly those producing EVs or transitioning to EV production, could lose significant market share to Chinese competitors. This could be especially challenging for smaller or less-established automakers.

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2. Reduced Profit Margins

• Price Wars: To compete with cheaper Chinese imports, Canadian automakers might be forced to lower their prices, squeezing profit margins. This could make it harder for them to invest in research and development (R&D) or expand production capacity.
• Cost-Cutting Measures: Automakers might resort to cost-cutting measures, such as reducing workforce or delaying investments in new technologies, to remain competitive.

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3. Job Losses and Economic Impact

• Plant Closures: If domestic automakers cannot compete with cheaper imports, they may be forced to scale back production or close plants, leading to job losses in manufacturing and related industries.
• Supply Chain Disruptions: The automotive industry relies on a complex supply chain. Reduced demand for domestically produced vehicles could hurt suppliers, leading to further job losses and economic downturns in regions dependent on the auto sector.

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4. Slowed Transition to EV Production

• Investment Challenges: Canadian automakers are investing heavily in transitioning from internal combustion engine (ICE) vehicles to EVs. If Chinese EVs flood the market, it could undermine the business case for these investments, slowing the transition.
• Loss of Competitive Edge: Chinese automakers are already leaders in EV technology, particularly in battery production. Removing tariffs could allow them to dominate the Canadian market, making it harder for domestic automakers to catch up.

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5. Geopolitical and Trade Risks

• Strained U.S. Relations: Canada’s auto industry is deeply integrated with the U.S. market. Removing tariffs on Chinese EVs could strain relations with the U.S., which is actively trying to counter China’s influence in the auto sector. The U.S. might retaliate with tariffs or other trade measures, harming Canadian exports.
• Dependence on China: Increased reliance on Chinese EVs could make Canada vulnerable to supply chain disruptions or geopolitical tensions, as seen in other industries during the COVID-19 pandemic.

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6. Quality and Brand Reputation Concerns

• Consumer Perception: If cheaper Chinese EVs flood the market, consumers might associate lower prices with lower quality, potentially harming the reputation of EVs in general. This could indirectly hurt domestic automakers who are trying to build trust in their EV offerings.
• Regulatory Challenges: Chinese EVs might not initially meet Canadian safety and environmental standards, requiring additional regulatory oversight. This could create an uneven playing field if domestic automakers face stricter compliance costs.

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7. Long-Term Industry Decline

• Loss of Innovation: If domestic automakers struggle to compete, they may reduce spending on innovation, making it harder for Canada to establish itself as a leader in the global EV market.
• Brain Drain: A declining auto industry could lead to a loss of skilled workers and engineers, who might move to other countries or industries with better prospects.

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Mitigating the Damage

If Canada decides to remove or reduce the tariffs, it could take steps to mitigate the damage to domestic automakers:

• Subsidies and Incentives: Provide financial support to domestic automakers to help them compete with cheaper imports.
• Local Content Requirements: Mandate that a certain percentage of EVs sold in Canada be produced locally or include locally sourced components.
• Investment in EV Infrastructure: Accelerate the development of charging infrastructure and other support systems to boost demand for domestically produced EVs.
• Phased Approach: Gradually reduce tariffs while giving domestic automakers time to adjust and improve their competitiveness.

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Conclusion

Removing the tariffs on Chinese EVs could severely damage Canadian automakers by exposing them to intense competition, reducing profit margins, and potentially leading to job losses and plant closures. While cheaper EVs might benefit consumers and help Canada meet its climate goals, the long-term impact on the domestic auto industry could be significant. Policymakers would need to carefully weigh these risks and consider measures to protect and support domestic automakers if tariffs are removed.

A more sensible approach?

Hugo Cordeau, a PhD candidate in economics at the University of Toronto who researches climate policies, said he worries about a potential backlash from the U.S. if Canada were to go back on its tariffs on Chinese EVs.

He said there may be a middle ground, noting the European Union took a more “sensible” approach by increasing its surtax on Chinese EVs from 10 per cent to as high as 45 per cent and incentivizing Chinese companies to open factories in Europe.

“I believe it’s just a double-edged sword. I think we misstepped initially, I think we should have went with the EU,” Cordeau said. “I think there’s probably still time to align with the EU without 100 per cent dropping the policy.”

Reducing prices on cheap EVs would be “great” for Canadian consumers, he said, arguing that in the long run, allowing more competition would also be good for the Canadian auto industry, which he said has so far focused on high-end, luxury EVs.

Folks’ Verdict

So, should Canada ease its 100% tariff on electric vehicles from China amid trade war with U.S.?

Folks’s answer is an unanimously YES.