China EV tariff review puts Ottawa on tightrope, balancing auto, canola, U.S. relations

The Canadian government has begun a review of its 100-per-cent tariffs on electric vehicles imported from China, as it tries to maintain support for two key local industries and find a balance between the world’s two largest economies.

“Officials are currently undertaking work on this review, including an assessment of China’s policies and trade practices, and whether the scope of the surtaxes, as well as the surtax rate, remain appropriate,” a Finance Canada official told Automotive News Canada.

The results are due by Oct. 1, one year after the federal government imposed the punishing tariffs on China-built EVs and hybrids, citing China’s “unfair” auto sector practices, ranging from oversupply to poor labour standards and a lack of environmental protections.

Canada’s 106% tariff on China-made EVs has automakers altering import plans

Saskatchewan Premier Moe says Canada should remove tariff on Chinese EVs

The assessment comes as Ottawa reengages with Beijing on trade. But on Sept. 5, Prime Minister Mark Carney said it was too early to say whether renewed talks could lead to EV tariff changes.

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“We have begun more intense engagement with China with respect first and foremost to canola and other agriculture and seafood products,” he told reporters at an event in the Toronto area. “I’m sure those discussions will branch out, but it’s too early to come to any conclusions.”

The federal surtax enacted on China-made EVs last fall kept Canada aligned with the United States, which had quadrupled its own tariffs on EV imports from China a few months earlier.

The tariffs stopped shipments of China-made EVs and hybrids into Canada virtually overnight, affecting Tesla, Polestar, Ford and Volvo. It also put an end to BYD Auto Co.’s plans to expand into the country.

EV tariffs put Canada’s auto, canola industries at odds

But the move placed Canada in the crosshairs of the Chinese government, which opened an anti-discrimination investigation in response in fall 2024 and placed 100-per-cent tariffs on Canadian canola oil and meal in March. A separate anti-dumping investigation into Canadian canola seed ran concurrently, leading to preliminary duties of 75.8 per cent on the major agricultural export in August.

Chris Davison, CEO of the Canola Council of Canada, said the two sets of duties will hit the sector hard.

“That effectively closes the Chinese market to the Canadian canola industry. So, those impacts are felt right across the canola industry value chain, starting at the farm gate,” he told Automotive News Canada.

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China is the second-largest market for Canadian canola after the United States, and the largest market for seed.

The industry group is calling on Ottawa to engage with China and make headway on resolving bilateral tensions.

“These are political issues that require political solutions,” Davison said.

Saskatchewan and Alberta premiers Scott Moe and Danielle Smith were more explicit.

In August, the leaders of Canada’s two top canola producing provinces said Ottawa should remove the tariffs on Chinese EVs.

The auto sector, meantime, maintains that the tariffs are necessary to shield the local industry from unfair competition.

Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association, told reporters Sept 5 that Canada should continue to engage with China, but maintain the tariffs.

“Any loosening of the tariff for the Chinese has to come with an opportunity for Canadian suppliers, or minerals and raw materials, or dealers, or Canadian workers. Right now, that’s not the prospect.”

The Canadian Vehicle Manufacturers’ Association and Global Automakers of Canada, groups that represent the five automakers that assemble vehicles in Canada, also back the China tariffs, saying allowing unfairly subsidized vehicles into the country would undermine the sector.

A range of EV advocates, on the other hand, say removing the barrier to China-made EVs would give Canadians access to cheaper vehicles and provide Ottawa a clearer path to hitting its environmental goals.

Canada wedged between world’s two largest economies

Staying onside with the United States adds another challenge for Ottawa, said Philippe Rheault, director of the China Institute at the University of Alberta.

“Every time you do something with China, there’s a risk … that’s going to upset your engagement with [Washington] D.C.”

Canada’s new government under Carney inherited a “poisoned chalice” from its predecessor, Rheault said, making the tariffs difficult to walk back without risking further fallout.

“If the Trudeau government had been a little bit more nuanced, they would have been able to come up with a response that would have on the one hand signaled to the Americans that we were all in on ‘Fortress North America,’ but at the same time, not use such a blunt instrument that now you have nowhere to go.”

Unlike in the European Union, where policymakers conducted a monthslong investigation into Chinese vehicle imports, and eventually assigned automakers tariff rates of between nine and 45 per cent, depending on the subsidy levels the investigation found each received, Canada imposed the catch-all tariffs after a 30-day consultation with industry.

“It was just a very quick consultation and a number thrown out there. I think that was grating [to China],” Rheault said.

Eliminating the tariffs or substantially lowering the rate would likely placate Beijing, which has been transparent about the tit-for-tat nature of its response, Rheault said. But it would also be certain to catch Washington’s attention at a time Ottawa is working to shore up its relationship with the United States.

Whether the Carney team decides to break with the Americans and chart its own path on China will likely depend on whether the Prime Minister’s Office sees a trade deal with Washington as achievable, Rheault said.

But as the tariff exchange with China stokes “uncomfortable” internal divisions, Ottawa is up against the clock to find a way forward, he added.

Stakes high for both auto, canola industries

Within Canada, the issue has pit Western farmers against Eastern industrial interests.

When calling for EV tariffs on China to be dropped last month, for instance, Saskatchewan Premier Scott Moe said the federal government must not “sacrifice” canola farmers to protect Canada’s auto sector.

Citing statistics from a Canola Council of Canada report released in August 2024, he said the canola sector is “significantly larger than the steel industry, the aluminum industry and the car manufacturing industry combined.”

The report found canola contributes $43.7 billion to the Canadian economy and helps employ about 200,000 Canadians,

But analysis of those tallies by the Trillium Network for Advanced Manufacturing found they were “at best an overreach and at worst overblown.”

The organization that advocates of behalf of Ontario manufacturers said canola farming and processing contributed $5 billion to Canadian GDP in 2024 and directly employed 21,576 people. That compared to the far larger automotive parts production and assembly, which together contributed $19.1 billion to Canadian GDP and directly employed 118,120 last year. All figures were derived from Statistics Canada publications.

Brendan Sweeney, the Trillium Network’s managing director, said presenting the broadest possible view of an industry’s economic contribution distorts its true scale.

“If I had the latitude to do that, I could make it $240 billion in automotive industry GDP.”

Sweeney said canola is an important part of the Canadian economy, but it is not as big a component as the Saskatchewan premier claims.

The Canola Council of Canada’s Davison said the group has been transparent about its report including direct, indirect and induced benefits. He would not comment on Moe’s use of the statistics.

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