Canada has a tariff dilemma

Tariffs recently announced by the U.S. on a slew of Chinese imports have forced Canada to answer some tough questions about its climate plans.

Catch up: Last week, the Biden Administration slapped new tariffs on a range of made-in-China goods, including electric vehicles, semiconductors, solar cells, and batteries.

  • Their goal is to protect American manufacturing businesses in key sectors of the economy from the stiff competition posed by cheaper Chinese imports.

Why it matters: The U.S. policy forces Canada to confront thorny questions about trade-offs between achieving aggressive climate goals and building a domestic clean energy and EV industry.

  • The federal government has set a goal of making 100% of new vehicles sold zero-emission by 2035, up from 11% today.

  • Many experts believe hitting that target won’t be possible if Canada adopts American-style tariffs that would make EVs unaffordable for most people.

Yes, but: If Canada doesn’t impose similar tariffs, its nascent EV and battery sectors — into which governments are ploughing billions of dollars — could be wiped out by low-cost competitors. 

  • Imports of made-in-China Teslas to Canada surged last year after the company began making EVs in Shanghai, and Chinese EVs are already flooding Mexico and Europe.

The elephant in the room: The U.S. government could make all these questions moot by simply demanding that Canada get on board with its trade policy or risk losing access to the American market when our free trade agreement comes up for review in 2026.—TS