On September 5, 2024, Canadian Prime Minister Justin Trudeau announced a 100% customs surcharge on all electric vehicles (EVs) manufactured in China, effective October 1, 2024. This significant move, which is expected to double the cost of Chinese EVs in Canada, is part of a broader strategy that includes a 25% tariff on Chinese aluminum and steel. Trudeau justified these tariffs as necessary to protect Canadian workers and industries from unfair competition, aligning closely with U.S. trade policies [31af91d9].
The customs surcharge, which raises the total import tariff from an initial 6.1% to 106.1%, means that a vehicle valued at $10,000 will now cost dealers over $20,000. Geneviève Dufour, a law professor, explained that the surcharge is based on the customs value, not the retail price. This measure aims to address China's 'unfair practices' and human rights violations, reflecting a growing trend among Western nations to impose similar tariffs [45c0cd28].
In a rapid response to Canada's tariffs, China has launched an investigation into these measures, citing 'discriminatory' practices under Article 7 of its foreign trade law. This marks a new precedent, as this article has never been used for trade action before. Analysts believe this investigation could lead to more trade disputes and that China plans to file a case against Canada at the World Trade Organization (WTO) [b09b4540]. The investigation is expected to begin in September and could extend through January 2025, reflecting China's strategic focus on Canada, which has less economic investment compared to the U.S. [b09b4540].
The Canadian government has framed these tariffs as essential measures to combat perceived unfair trade practices from China, particularly highlighting China's state-directed policies as a primary concern [0504b7bd]. U.S. National Security Advisor Jake Sullivan has urged coordinated action against Chinese EV sales, further solidifying the alignment between Canadian and U.S. trade policies [31af91d9]. U.S. Trade Representative Katherine Tai also endorsed Canada's decision, emphasizing the need to counter China's 'unfair' non-market policies that threaten market-oriented industries [bccbaf17].
In a related development, the Biden administration finalized significant tariff hikes on Chinese imports on September 13, 2024, which will take effect on September 27, 2024. This includes a 100% duty on electric vehicles, 50% on solar cells, and 25% on EV batteries, critical minerals, steel, aluminum products, and ship-to-shore cranes [a2b2036c]. Lael Brainard, a key economic advisor, emphasized the need for 'tough, targeted' tariffs to counter China's subsidies [3a0d4b93]. However, experts like Kuang Xianming from the China Institute for Reform and Development criticized the decision, arguing it could backfire and harm U.S. industries while disrupting global trade [a2b2036c].
Critics of the tariffs, including Joanna Kyriazis from Clean Energy Canada, argue that these measures could reduce the availability of affordable EVs for consumers, ultimately hindering the transition to emission-free vehicles. Kyriazis warned that the tariffs would lead to less competition and increased climate pollution, raising concerns about their long-term impact on Canada's climate goals [0504b7bd].
In response to Canada's tariffs, China announced on September 3, 2024, that it would initiate anti-dumping investigations into Canadian canola and chemical products. This move is seen as a direct retaliation, as Canadian canola exports to China reached US$3.47 billion in 2023. China plans to address the issue at the WTO and will also impose a surtax on steel and aluminum imports from Canada effective October 15, 2024 [b0661130].
The Chinese Commerce Ministry condemned Canada's tariffs as trade protectionism that violates WTO rules. Lin Jian, a spokesperson for the ministry, warned that such measures could disrupt global supply chains and called for Canada to reconsider its approach [ef2ca528].
In addition to the tariffs on EVs, Deputy Prime Minister Chrystia Freeland indicated a 30-day consultation period to consider potential tariffs on Chinese batteries and critical minerals. This broader strategy aims to address concerns over China's state-directed overcapacity in various sectors [ef2caacc2].
Meanwhile, as tensions escalate, the Chinese government is preparing for retaliation against the U.S. tariffs, which are expected to affect a wide range of goods. The U.S. tariffs on Chinese imports, which began in 2018 under the Trump administration, have continued to evolve, with new levies announced in May 2024 targeting solar panels and electric vehicles [96f5cdf3]. Both sides agreed to maintain communication on various trade issues, reflecting ongoing tensions in U.S.-China trade relations.
As the U.S. is expected to announce similar tariffs on $18 billion worth of Chinese imports, including 100% on EVs and 50% on semiconductors, many U.S. companies are requesting eased duties and expanded exclusions [bccbaf17]. The Chinese Embassy in Canada also condemned the tariffs, emphasizing that they could disrupt the vital economic relationship between Canada and China, which is Canada's second-largest trading partner [aeeaacc2].
Unifor President Lana Payne has expressed support for the tariffs, framing them as necessary for protecting Canadian jobs. However, the collaboration between Canadian unions and the government in the context of rising tensions with China has drawn criticism, with some arguing that these actions serve imperialist interests rather than the needs of the working class [31af91d9].
In light of rising exports of Chinese EVs and steel, which are projected to reach an eight-year high, analysts like Sam Lowe have criticized Canada's tariff actions for straying from WTO rules. This situation reflects a broader trend where U.S. suppliers' reliance on China increased by 2% from 2017 to 2022, while the EU is deepening trade ties with China amidst U.S. efforts to de-risk its economy [1e6b5131]. As Canada navigates these trade tensions, the long-term implications for its economy and international relations remain uncertain, with many urging a more independent approach to foreign policy [ef2ca528].
In a parallel development, on November 4, 2024, former President Donald Trump proposed new tariffs on U.S. imports, suggesting rates of 60-100% on Chinese goods and 10-20% on all imports. These tariffs could significantly impact American consumers, potentially reducing their spending power by $46 billion to $78 billion annually. For instance, a $40 toaster oven could cost consumers between $48 and $52 post-tariff [247d31d0]. Jonathan Gold of the National Retail Federation stated that tariffs are essentially a tax on U.S. consumers, emphasizing the potential burden on household budgets [247d31d0].
As inflation rates have already reached 8% in 2022 and 4.1% in 2023, the introduction of these tariffs could exacerbate financial pressures on American families. Kamala Harris is expected to continue Biden's trade policies, which may align with or counter Trump's proposals as the 2024 elections approach [247d31d0].
Current tariffs include those on steel, aluminum, and Chinese goods, with Biden maintaining some of Trump's policies. However, Trump's proposed tariffs could cost American families between $1,700 and $2,600 annually, raising concerns about the potential for retaliatory tariffs and the risk of escalating trade wars [5ee5380b].
Trump's blanket tariff plan includes a 20% tariff on all trading partners and up to 60% on goods from China, which could spark a trade war. The U.S. economy is currently considered one of the strongest, but the proposed tariffs could make goods more expensive for consumers, echoing past losses faced by U.S. soybean farmers during previous trade conflicts, where taxpayers subsidized farmers by $28 billion [4e74bb9c].
As these developments unfold, the impact of tariffs on both the U.S. and Canadian economies will be closely monitored, with many experts warning against the potential negative consequences of trade wars.