As Canada navigates escalating trade tensions with the U.S., some economists are questioning whether the federal government should ease or lift its 100% tariff on Chinese electric vehicles (EVs)—a move that could lower prices for consumers and challenge Tesla’s dominance in the market.
However, Canadian automakers warn that removing the tariffs could flood the market with low-cost Chinese EVs, threatening the country’s growing domestic EV industry and billions in recent investments.
A Trade War Complicates Canada’s EV Strategy
Canada introduced the 100% tariff on Chinese EVs last fall, following the U.S.’s lead, while also imposing a 25% surtax on steel and aluminum imports from China.
But since Donald Trump’s return to office, the U.S. has targeted Canada with a wave of tariffs, including levies on Canadian steel, aluminum, and auto parts—raising concerns that Canada’s EV protectionism could now backfire.
Economists Say Canada Should Reconsider the Tariffs
Economist Julian Karaguesian from McGill University argues that lifting the tariff on Chinese EVs could be a strategic countermeasure against Trump’s trade policies—while also offering more affordable EV options for Canadians.
“If we wanted to hit back at Trump’s biggest financial supporters, we don’t have to tariff Tesla or American EVs,” Karaguesian said. “We just have to remove the tariff on Chinese vehicles.”
China’s BYD Seagull, for example, starts at just $14,600 CAD, significantly cheaper than Canada’s most affordable EVs, which start at $40,000.
Automakers: Canadian EV Industry at Risk
Industry leaders, however, oppose the idea, warning that China’s ability to produce nearly 80% of global vehicle demand could crush Canada’s emerging EV sector before it fully develops.
Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, insists that the tariffs are necessary to protect $46 billion in EV investments Canada has attracted since 2020.
“China has the capacity to overwhelm the market,” Kingston said. “If we allow their EVs in now, it will be impossible for Canada to build a competitive industry.”
Would Lower Chinese EV Prices Spur Adoption?
Other experts argue that allowing cheaper Chinese EVs could help Canada accelerate EV adoption—and even increase demand for charging infrastructure, which remains a major obstacle for consumers.
Sumeet Gulati, an environmental economist at the University of British Columbia, believes Canada may eventually have no choice but to bring in more foreign EVs to meet its goal of phasing out gas-powered vehicles by 2035.
“If Canada keeps missing its EV adoption targets, we’ll need to look beyond North America for solutions,” Gulati said.
Should Canada Follow Europe’s Lead?
Instead of a full rollback, some economists suggest a middle ground, pointing to the European Union’s more balanced approach—raising its Chinese EV tariff to 45% rather than implementing a 100% ban.
Hugo Cordeau, an economist at the University of Toronto, says Canada should align with the EU, arguing that completely reversing the tariff could spark U.S. backlash.
“We misstepped initially,” Cordeau said. “There’s still time to adjust our policy without completely dropping it.”
Canada Caught in the Crossfire of U.S.-China Tensions
Despite differing opinions, experts agree on one thing: Canada remains heavily dependent on U.S. trade policy.
“Canada is at the mercy of U.S. decisions,” Gulati said. “We may need to wait for the tariff war to settle before making any drastic moves.”
For now, Canada faces a difficult choice—protect its domestic EV industry or give consumers access to cheaper Chinese EVs while retaliating against Trump’s trade war.
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