Canada imposes a 100% tariff on imports of Chinese-made EVs

Canada’s government on Monday announced it is imposing a 100% tariff on imports of Chinese-made electric vehicles that matches US tariffs and follows similar plans announced by the European Commission.

The announcement came after encouragement by US national security advisor Jake Sullivan during a meeting with Canadian Prime Minister Justin Trudeau and cabinet ministers on Sunday. Sullivan is making his first visit to Beijing on Tuesday.

Trudeau said Canada also will impose a 25% tariff on Chinese steel and aluminium.

“Actors like China have chosen to give themselves an unfair advantage in the global marketplace,” he said.

There was no immediate response from China.

Chinese officials are likely to raise concerns about American tariffs with Sullivan as Beijing continues to repair its economy after the COVID-19 pandemic. US President Joe Biden in May slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminium and medical equipment.

“The US does believe that a united front, a coordinated approach on these issues benefits all of us,” Sullivan told reporters on Sunday.

Biden has said Chinese government subsidies for EVs and other consumer goods ensure that Chinese companies don’t have to turn a profit, giving them an unfair advantage in global trade.

Chinese firms can sell EVs for as little as $12,000. China’s solar cell plants and steel and aluminium mills have enough capacity to meet much of the world’s demand. Chinese officials argue their production keeps prices low and would aid a transition to the green economy.

“We’re doing it in alignment, in parallel, with other economies around the world that recognize that this is a challenge that we are all facing,” Trudeau said of the new tariffs. “Unless we all want to get to a race to the bottom, we have to stand up.” Deputy Prime Minister Chrystia Freeland said Canada also will launch a 30-day consultation about possible tariffs on Chinese batteries, battery parts, semiconductors, critical minerals, metals and solar panels.

“China has a intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry,” Freeland said. “We simply will not allow that to happen to our EV sector, which has shown such promise.” The only Chinese-made EVs currently imported into Canada are from Tesla, made at the company’s Shanghai factory.

Canada “had to go with the US position, when you think about the economic integration that we have with the US More than 75% of our exports go to the US,” said a former Canadian ambassador to China, Guy Saint-Jacques. “This reflects the fear that the next president of the United States might be Donald Trump, and so they know we have to be pretty much aligned in all of this.” Saint-Jacques said Canada can expect retaliation from China in other industries, adding that barley and pork are candidates because the Chinese can get it from other countries.

“China will want to send a message,” he said.

Separately, Canada’s main stock index hit another record high on Monday in a broad-based rally led by energy and mining stocks, while September rate cut optimism in the United States also boosted investor sentiment.

At 9:59 am, the Toronto Stock Exchange’s S&P/TSX composite index was up 118.64 points, or 0.51%, at 23,404.72, and is poised to extend its record-setting streak from Friday.

At least ten major sectors on TSX logged gains, with the energy sector climbing 2.1% as oil prices rose nearly 3% on reports of a near total production stoppage in Libya.

The materials sector rose 0.5% tracking gold and copper prices that gained due to a weaker dollar and on hopes of a US rate cut next month.

Federal Reserve Chair Jerome Powell on Friday endorsed the commencement of policy easing cycle, while acknowledging that inflation was on a sustainable downward path to a 2% target.

“When you have five and a quarter Fed funds rate and inflation rate at around 2.5%, there’s a lot of room for cutting,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.

Market participants are betting on a higher chance of 25 basis points cut at the policy meeting next month.

The focus will be on the U.S. personal consumption and gross domestic product estimates expected later in the week, along with AI-darling Nvidia’s quarterly results due on Wednesday.

Back home, the canada Industrial Relations Board ordered to end work stoppages at the railways operators that posed a threat to canada’s export-driven economy.

In an important week for Canadian earnings, major lenders like Bank of Nova Scotia, Royal Bank of canada, and the National Bank of canada are expected to report their quarterly results.

Agencies