After Canada announced plans to impose tariffs on electric vehicles, steel and aluminum products made in China, Beijing vowed to take all measures necessary to protect the interests of Chinese companies.
Canadian Prime Minister Justin Trudeau announced Monday that Canada will impose a 100% tariff on Chinese-made electric vehicle imports starting Oct. 1, and a 25% tariff on Chinese-made steel and aluminum starting Oct. 15.
“We are transforming Canada's auto industry into a global leader in building the cars of tomorrow,” said Prime Minister Trudeau, “But forces like China choose to gain an unfair advantage in the global marketplace, threatening the security of our critical industries and displacing dedicated Canadian auto and metals workers.”
“Subsidies do not create industrial competitiveness, while protectionism only protects backwardness. Future development will be sacrificed,” Chinese foreign ministry spokesman Lin Jian said at a press conference on Tuesday.
“The rapid development of China's EV industry is the result of continuous technological innovation, an established industrial and supply chain, and perfect market competition,” he said. “This is what happens when our comparative advantages exactly meet the market needs.”
He said China condemns and opposes Canada's move, saying it ignores facts, disregards WTO rules and goes against historical trends.
He said this classic protectionist move would disrupt China-Canada trade relations, harm Canadian businesses and consumers, and do little to help Canada's green transition process and global efforts to address climate change.
Some commentators said the Canadian tariffs would only affect Tesla EV imports from China because major Chinese EV brands have yet to enter the Canadian market. They said major Chinese EV makers such as BYD, which initially planned to ship products to Canada in 2025, would have to consider setting up factories in Canada to avoid the new tariffs.
Impact on Tesla
According to Automotive News Canada, Tesla sold 36,900 EVs in Canada last year and expects to sell 24,400 in 2022. The company, run by entrepreneur Elon Musk, currently supplies EVs made in Shanghai to Canada but could avoid the new tariffs if it switched to supplying Canada from factories in Germany or the United States.
Liu Chunsheng, an associate professor at Beijing's Central University of Finance and Economics, told China News Agency that Canada's EV tariffs would not directly hit Chinese companies but could force Tesla to cut production in China.
“The main export destinations for Chinese-made EVs are not the U.S. or Canada, but Southeast Asia, Eastern Europe and some countries along the Belt and Road,” Liu said. “Canada's tariffs will not have a negative impact on Chinese-made EV exports.”
“But it's important to note that the U.S. is urging its allies to reduce or block imports of Chinese-made EVs. Canadian tariffs will set an example and influence other countries' decisions,” he said. “Furthermore, Tesla may be forced to cut production in China.”
In March, Tesla announced it was cutting back on its car production in China due to weak demand and fierce competition in the market. Reuters later reported in May that Tesla's Model Y production in Shanghai was 49,498 units in March and 36,610 units in April, down 17.7% and 33%, respectively, year-on-year.
The Shanghai factory is Tesla's largest manufacturing facility in the world, with an annual production capacity of approximately 1 million units.
BYD's plans
The Biden administration raised U.S. tariffs on imports of Chinese-made EVs from 25% to 100% in May, and in July imposed tariffs of 25% on steel products and 10% on aluminum products imported from China via Mexico.
Mexico has not yet raised tariffs on Chinese-made EVs, but since April it has stopped offering incentives such as tax breaks and low-cost land for domestic EV production.
The European Union imposed tariffs of between 17% and 38% on Chinese-made electric vehicles in early July, but analysts said Chinese EV companies have a cost advantage that would allow them to absorb the EU's new tariffs.
BYD currently sells electric buses and trucks in Canada, and the Shenzhen-based company reportedly plans to sell passenger EVs in Canada in 2025, first through retail sales and then later through a ride-sharing program with Uber.
On July 31, Uber and BYD announced a multi-year strategic partnership aimed at bringing 100,000 new BYD electric vehicles to the Uber platform in major markets around the world. The partnership will begin in Europe and Latin America, before expanding to the Middle East, Canada, Australia and New Zealand, according to the announcement.
The Financial Times reported last month that the UK government has no immediate plans to follow the EU lead in investigating Chinese subsidies to the car industry or impose new tariffs on Chinese-made EVs.
Australia also has not imposed additional tariffs on Chinese-made EVs. Media reports say more than 550,000 Chinese-made vehicles have been sold in Australia in the past 15 years.
Read: Chinese EVs still aiming for EU's protected market
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