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Tesla Faces Potential Setback as Canada Considers Tariffs on Chinese-Made EVs

Canada is considering imposing taxes on Chinese-made EVs in order to defend its automotive industry and EV firms. The decision follows similar moves taken by the US and the EU. The consultation is intended to eliminate unfair trade practices and protect Canadian workers.

 Tesla cars

The Canadian government has accused China of "anticompetitive practices" and intends to hold a public consultation to discuss potential tariffs on Chinese-made EVs. This follows a similar measure taken by the US government.

The month-long consultation, which begins July 2, aims to protect workers in Canada's automotive industry and its developing EV firms from unfair trade practices. The Department of Finance noted that the consultation will pave the way for rules that level the playing field and avoid transshipment or oversupply caused by China's anticompetitive actions.

Chrystia Freeland, Canada's Deputy Prime Minister and Finance Minister, raised worry about the intentional overcapacity strategy, which undercuts the Canadian EV sector's ability to compete both domestically and internationally. The consultation aims to solve these issues while protecting Canadian jobs.

The action by Prime Minister Justin Trudeau's government comes shortly after the White House proposed a fourfold increase in tariffs on Chinese-made EVs as part of moves to punish Chinese imports worth US$18 billion. The Biden administration also raised duties on lithium batteries, steel, essential minerals, solar cells, and semiconductors.

The survey in Canada will also address cyber and data security issues connected to preserving Canadians' privacy and national security. The statement emphasised China's unfair trade practices, such as low standards across EV supply chains, lax labour standards, a lack of environmental safeguards, and trade rules that encourage oversupply.

Tesla's Model Y vehicles, made at its Shanghai Gigafactory, are currently the only Chinese-built battery-powered cars exported to Canada. These vehicles are subject to a 6% import duty. However, the impact for Chinese EV builders is projected to be modest, as trade obstacles are unlikely to prohibit global customers from getting cost-effective Chinese EVs manufactured domestically.

China has become the world's largest automobile and EV market, with electric vehicles accounting for 60% of total sales. In a separate event, the European Union (EU) has agreed to levy additional taxes ranging from 17.4% to 38.1% on Chinese-made pure-electric vehicles as part of an anti-subsidy probe. These levies will go into effect on July 4, in addition to the existing 10% duty on Chinese-made electric vehicles.

Unlike the limits imposed by the White House, which have no direct impact on Chinese carmakers such as BYD because their models are not offered in the US, the EU's new taxes are expected to hurt Chinese EV manufacturers. BYD, the world's best-selling EV manufacturer, is expected to withstand the storm thanks to its cost-effectiveness and long-term 25% cost advantage over traditional marques in the EU.

  • Canada is exploring potential tariffs on Chinese-made EVs to protect its automotive industry and EV businesses.

  • The move follows similar actions taken by the United States and the European Union.

  • The consultation aims to address unfair trade practices and protect Canadian workers.

Source: SCMP

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