I realize that tariffs and electric vehicles aren’t the most alluring subject in mid-August, when we’re trying to hold on to the last weeks of summer.
But you have literally billions of reasons to pay attention — exactly 52.455 billion reasons, which according to the Parliamentary Budget Officer is the number of your tax dollars that governments have invested in the EV industry so far.
That alone means the federal government has no choice but to stop a flood of cheap Chinese-made EVs into Canada. It would be absurd to spend those billions to build a domestic industry and then cut it off at the knees by allowing cut-price rivals to destroy its market.
But that isn’t the only reason for Ottawa to impose stiff tariffs against Chinese EVs and components. The other is that the United States has already taken action (as did the European Union a month later). And as we try to persuade American policymakers to keep treating auto manufacturing as one big North American industry, it makes no sense to open a Canadian back door to Chinese imports.
For both those reasons, it’s pretty much inevitable that the Trudeau government will follow suit and put in place tariffs designed to counter the price advantage that Chinese-made vehicles now have — they’re two to three times cheaper on average than EVs sold in North America.
But why hasn’t that happened already? It’s exactly three months and two days since the Biden administration announced tariffs of 100-per-cent on Chinese EVs and higher tariffs on such things as EV batteries and solar cells made in China.
Instead of acting decisively along the same lines, the Liberal government announced a 30-day consultation period on the issue. It wasn’t clear what they expected to find out in a month that they didn’t already know. At any rate, the consultations concluded on Aug. 1 and two weeks later there’s still no action.
From a purely political angle, that wasn’t smart. As the government dithered, or consulted, Conservative Leader Pierre Poilievre jumped out ahead. He announced he would impose 100-per-cent tariffs against Chinese EVs and accused the Liberals of doing “nothing to protect our workers and our jobs.”
Given the government’s massive investment in the future of the auto industry, that was rich; Prime Minister Justin Trudeau quite rightly called Poilievre’s claims “baloney.” But why delay and delay and give your opponents a stick to beat you with?
It’s also puzzling because there’s no doubt where the government is heading. Finance Minister Chrystia Freeland addressed the issue in late June and was explicit. She said Ottawa is determined that Canada “does not become a dumping ground” for Chinese EVs that are being overproduced and are flooding international markets.
Canada, she went on, “is facing unfair competition from China’s intentional, state-directed policy of overcapacity that is undermining Canada’s EV sector’s ability to compete in domestic and global markets.” Not much wriggle room there.
Freeland’s reasoning was key. Tariffs in a market-driven situation are destructive. They just amount to a tax on consumers, who must pay higher prices to protect domestic producers from competition.
But China, according to Freeland and the U.S. government, isn’t driven by market considerations. Its state-directed auto industry is out to dominate the emerging global EV market and the first step is to undercut North American competitors. There are also concerns in the areas of surveillance and cybersecurity; some fear Chinese companies could embed information-gathering technology in its vehicles.
The government may be taking extra time to figure all this out. It must also weigh what kind of response China will make against Canadian exports. And it may just want to go through the motions to demonstrate to China and perhaps itself that it isn’t just slavishly copying U.S. policy.
But everyone knows where this is going to end up. Better to cut to the chase and figure out the details down the road. Canada has more than 52 billion reasons to act — and counting.
