Department of Finance Canada announced on 26 August a 100% surtax on all Chinese-made electric vehicles from 1 October 2024, Kallanish reports.

According to the department, the Canadian government intends to implement the new tax on electric and certain hybrid passenger automobiles, trucks, buses and delivery vans. It published a detailed list of items to be subject to the new measures, specifying power type and volume, vehicle purpose, vehicle size and others criteria.

The move is said to create a “level playing field” for Canadian workers, allowing the country’s EV industry to compete in domestic, North American, and global markets. “Canadian auto workers and the auto sector currently face unfair competition from Chinese producers, who benefit from unfair, non-market policies and markets,” the department adds in a statement.

The Chinese Embassy in Canada has expressed “strong dissatisfaction and resolute opposition” towards the decision and allegations. “This move is typical trade protectionism and politically-motivated decision, which violates the World Trade Organization (WTO) rules and goes against Canada’s traditional image as a global champion of free trade and climate change mitigation,” says a spokesperson.

Ottawa announced in June it would launch a public consultation on whether to apply extra tariffs on China-made EVs, which were subject to a 6.1% import duty. Some market observers believe the move is symbolic since most of the China-made EV imports into Canada are from Tesla, rather than Chinese brands. Others say it has to match US policy, given 75% of Canadian exports go to the US.

“We are transforming Canada’s automotive sector to be a global leader in building the vehicles of tomorrow,” Canadian Prime Minister Justin Trudeau said while announcing the decision at the federal cabinet retreat in Halifax on Monday. “But actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian autos and metal workers.”

In addition to EV measures, Canada is also implementing a separate 25% tax on steel and aluminium made in China, which will go into effect on 15 October.

Flavio Volpe, president of the Automotive Parts Manufacturers Association, welcomed the move, after heavily pushing for the surtax. “What they’ve done today … is to buy time for the North American auto investment to bear fruit,” he said.

China’s commerce ministry says Canada’s move “blatantly violates WTO rules and blindly follows individual countries to announce that it will take unilateral tariff measures, which is a typical trade protectionism.” It added the surtax will “disrupt the stability of the global industrial chain and supply chain … and severely impact China-Canada economic and trade relations.”

Ottawa will also launch a second 30-day consultation concerning other sectors critical to Canada’s future prosperity, including batteries and battery parts, semiconductors, solar products, and critical minerals. A consultation notice will be released in the coming days to help inform any further government action.

BYD is reportedly considering setting up manufacturing capacity in Canada.