Following the lead of the United States and the European Union, Canada said on Monday that it will slap a 100% tax on imports of Chinese electric vehicles, as well as a 25% tariff on imported steel and aluminium from China.
According to a Canadian government official, duties will apply to any EVs transported from China, including Tesla’s (TSLA.O).
Shares of the world’s most valuable automaker plummeted 3%.
Canadian imports of autos from China to its major port, Vancouver, increased by 460% year on year in 2023, when Tesla began exporting Shanghai-made EVs to Canada.
Impact of Canadian Tariffs on the Global EV Market
Prime Minister Justin Trudeau said Ottawa was taking action to fight what he described as China’s deliberate, state-directed program of overcapacity. “I think we all know that China is not playing by the same rules,” he told reporters. Tariffs will be levied beginning October 1.
“What is important about this is that we’re doing it in tandem with other economies around the world,” Trudeau said on the eve of a three-day closed-door cabinet meeting in Halifax, Nova Scotia.
The Chinese embassy in Ottawa was not immediately available for comment.
China is Canada’s second-largest trading partner, but well behind the United States.
Tesla has not disclosed its Chinese exports to Canada. However, vehicle identifying numbers revealed that the Model 3 small sedan and Model Y crossover were being exported from Shanghai to Canada.
“There is a 100% surtax on all Chinese-made EVs. If companies who are already producing vehicles in China decide to relocate, they will no longer be subject to this tariff, according to a government official.
Tesla did not immediately respond to a request for comment.
“In response to the tariffs, I would expect Tesla to shift its logistics and potentially export autos to Canada from the U.S.,” said Seth Goldstein, Morningstar equities strategist.
“The market is likely reacting to the tariffs and weighing a potential profit impact if Tesla has to export vehicles to Canada from its higher-cost production base in the U.S.,” Goldstein said in reference to the share decline.
How Canada’s Tariffs Align with Global Trade Trends
This month, the EU reduced duties on Chinese-imported EVs to 9% for Tesla, compared to up to 36.3% for other Chinese imports.
Ottawa will continue to collaborate with the United States and other partners to ensure that customers worldwide are not unfairly penalised by countries such as China’s non-market practices, Trudeau stated.
Trudeau said Ottawa is considering other punitive measures, such as levies on semiconductors and solar cells, although he did not elaborate.
In May, US President Joe Biden increased tariffs on Chinese electric vehicles to 100%, doubled duties on semiconductors and solar cells to 50%, and imposed new 25% tariffs on lithium-ion batteries and strategic goods like steel to protect firms from Chinese excess production.
Ottawa is attempting to portray Canada as a major component of the global EV supply chain and has being pressured by domestic business to take action against China.
Canada has signed billion-dollar accords to recruit leading European automakers at all stages of the EV supply chain.
“We feel validated and motivated. Let us now focus on protecting our market with the best of Canadian creativity and commitment,” said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, in an email.
Tariff implementation in the US has been delayed until September, with the prospect of softening levies this week.
Source: Reuters
