As Prime Minister Mark Carney is set to meet with U.S. President Donald Trump on Tuesday, the federal government has its work cut out for it following a tumultuous few months in domestic politics — not just on the tariff front with the U.S., but also with the world’s second-largest economy.
In the fall, Canada followed in the footsteps of then-U.S. president Joe Biden in implementing an additional 100 per cent surtax on Chinese-made electric vehicles — a move critics say makes less sense now considering the fractured relationship with our southern neighbours, our climate goals and China’s counter-tariffs on Canadian canola farmers.
“That was a dumb policy, and we … followed suit by demonstrating our allegiance [to the U.S.],” said Jessica Green, political science professor at the University of Toronto who focuses on climate change and global climate politics.
“The ground has shifted … making it an even dumber policy.”
China’s counter-tariff on Canadian canola
Last May, Biden announced he would be quadrupling the tariffs on electric vehicles imported from China to 100 per cent, among other tariff hikes, including on semiconductors. Following widespread speculation, Canada followed suit several months later, levying an additional 100 per cent tariff on top of the existing six per cent, drawing both applause and criticism, depending on who you ask.
“Canada was not thinking for itself last year,” said Josipa Petrunic, president and CEO of industry organization the Canadian Urban Transit Research & Innovation Consortium (CUTRIC).
“We have gotten away with being a bit intellectually lazy on the trade front because we always assumed we had this really positive partner next door.”
In retaliation to the EV tariffs, China slapped its own 100 per cent surtax on Canadian canola oil and meal, as well as 25 per cent on seafood and pork.
China is currently the second-largest market for Canadian canola exports, with oil and meal exports amounting to $20.6 million and $918 million, respectively, in 2024, according to the Canola Council of Canada.
“We’re the ones taking the brunt of the hit right now,” said Andre Harpe, canola farmer and chair of the Canadian Canola Growers Association.
“We have a new Canadian government coming in … as job one, I would very much like to see them deal with these tariffs.”
Agriculture and Agri-Food Canada told CBC News it is supporting farmers through several business risk management programs.
China imposed 100 per cent tariffs on Canadian canola oil and meal last month, creating uncertainty for roughly 40,000 farmers as well as workers in supporting industries.
It’s important to point out China could have been more heavy-handed. However, it fell short of taxing the product that would hit farmers the hardest — canola seed, which amounted to $4.9 billion in exports to China last year.
“China can put these [seed] tariffs on now anytime they want to,” said Harpe.
Climate concerns and EV adoption
It’s not just pushback from the industries caught in the middle of the tit-for-tat that’s driving the conversation — the implementation of the tariffs now calls into question whether Canada can meet its target of reducing emissions by 40 per cent below 2005 levels by 2030 and net-zero emissions by 2050.
A part of that plan was the federal government’s electric vehicle sales mandate regulations, which included a national target of 100 per cent zero-emission vehicle sales in Canada by 2035.
“If you want EVs to be purchased by Canadian consumers, we need to have affordable models,” said Louise Lévesque, senior policy director at Electric Mobility Canada, a national industry association working to advance electric transportation.
Considering the cost of an EV in Canada varies between almost $40,000 and $327,000 for luxury models, EVs are still out of reach for many Canadians.
“We know that the Chinese vehicles could fill that gap,” said Lévesque.
Currently, the cheapest EV on the market is the Seagull, from Chinese automaker BYD, coming in at roughly $13,000 Cdn.
Protecting domestic manufacturing
Instead of engaging with China, part of Canada’s plan to transition to electric vehicles and cut emissions was to pour billions of dollars into fostering a domestic industry, arguably one that has been neglected until the last few years.
According to the Office of the Parliamentary Budget Officer, the federal government has announced a total of $46.1 billion in capital investments in the EV industry between Oct 2020 and April 2024.
That included a multi-billion dollar project for Honda to create an EV supply chain in Alliston, Ont., including building four new manufacturing plants.
The plan, however, involved the U.S., as the auto industry between the two nations is inextricably linked. With Trump’s tariffs, growing the sector under that plan is a lot less certain. This is where China comes into play.
However, Canada’s auto manufacturing sector is concerned about Ottawa’s investments, and whether those efforts would all be in vain should the government make it easier for Chinese-made vehicles to enter the market.
“We can absolutely not undermine our own industrial base by allowing these vehicles into the market,” said Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers Association.
On the campaign trail, both Pierre Poilievre and Mark Carney campaigned on speeding up approvals to develop the mineral-rich Ring of Fire in northern Ontario — a key pillar of Canada’s strategy to become more economically independent and in developing our own EV supply chain.
But Kingston argues EVs made in Canada could never compete price-wise with Chinese vehicles.
“There is a real risk that the Canadian market would be flooded with dumped vehicles from China,” he said, pointing out Chinese cars are subsidized at rates that “pale in comparison to what you see in North America.”
Collaborating with China?
However, there is a world where consumers could have access to more affordable EVs while still protecting domestic manufacturing, according to some experts.
While scrapping the tariffs “would have real victims” considering Canada’s “mature” manufacturing sector, Niel Hiscox, president of Clarify Group Inc., a Toronto-based automotive research and advisory firm, says there could be a point down the road where Canada and China can collaborate.
He says it’s especially important in research and development.
“In battery technology and EVs, [China is] now absolutely the world leader,” he said. “Frankly, what needs to happen is a reverse of that kind of joint venture technology transfer.”
Lévesque, with Electric Mobility Canada, says Canada could follow Europe with a more targeted tariff (Europe is now re-negotiating that tariff of up to 45.3 per cent on Chinese EV imports), or policymakers could implement a time limit on them.
“It would be to give time for the North American industry to … get on track before these arrive. But it needs to be clearly set with a dated target and also what we expect from these companies when that time is done,” she said.
She also suggests only making Canadian-made cars eligible for rebates.
Green, at the University of Toronto, says Canada could subsidize the industry in some way or set a minimum price to control the level of imports.
Overarchingly, Canada’s response on the EV question can be seen as an indication of the approach it will take to its economic policymaking going forward, especially as Carney has repeatedly declared the “old relationship” with the U.S. is “over,” and it’s unclear whether Canada can succeed in developing its own industry.
The EV trade war could be the test case for a much bigger set of questions as Canada’s prime minister is set to meet with his U.S. counterpart Tuesday.
“Will [Carney] forge his own path or engage in this weird hokey pokey dance with Trump?” said Green.
