Should Canada remove its tariffs on Chinese-made electric vehicles?

Canada’s Emission Reduction Plan, first published by Trudeau’s government in 2022, is in for some revisions this fall. Several signals from Mark Carney’s government have made pointed suggestions as such. Frankly, logically, it should be – climate-related policies were designed as a complementary suite to address Canada’s emissions. We have a significant one that’s been taken out since May’s election – the federal fuel charge – and consequently, our Nationally Determined Contribution under the Paris Agreement is no longer consistent with our policies.

Distinct from the federal fuel charge, I believe that there are several federal-level policies on the chopping block or at least lined up for significant reform (this is aside from my expectation that sometime in the coming months the design of a Carbon Border Adjustment Mechanism will begin). One of the policies that is very likely poised for reform is Canada’s Electric Vehicle Availability Mandate, more colloquially known as the Zero Emission Vehicle (ZEV) Mandate. The mandate aims for 100% of new light duty vehicle sales by 2035.

A muddied landscape for ZEV adoption

The latest public update from Transport Canada indicates that in 2023, Canada achieved a level of almost 12% of sales of new light duty vehicles from ZEVs. ZEV rebates have ended in much of the country to support buyers in lowering sticker prices and thus propping up some of those sales. Several automakers, largely the ones with manufacturing facilities in North America, are pulling back on their original ambitious light duty EV plans. Tesla has developed a black eye, its sales dropping precipitously.

So for the time being, given vehicle turnover rates, it seems highly unlikely that Canada can achieve 100% ZEVs for new light duty vehicles in 10 years’ time.

A caveat to all of this: Chinese-made EVs.

I will admit that I haven’t driven one myself (if I’m traveling it’s pretty much three options: walk, transit, or campervan), but I’ve been in plenty – across Asia, in Australia, and in New Zealand. And because I am who I am, I will ask the driver what their experience is like. Anecdotal for sure – but consistent. Every driver I’ve asked raves about them – in particular, BYD vehicles. BYD took over Tesla on the Fortune 500 based on its global sales in 2024. And to be clear, these drivers are raving about the vehicles’ performance – not remotely their climate-related credentials.

So why don’t we have them in Canada?

The player on the bench

Canada’s relationship with China turned definitively south in 2018 with the arrest of Meng Wanzhou, deputy chair and CFO of Huawei, when she was detained at Vancouver’s airport by Canadian personnel and placed under house arrest on extradition request by the United States. A series of mounting tensions resulted since that incident, including the detention of several Canadian citizens in China, diplomatic expulsions, accusations of Canadian election interference, and trade disputes over canola. Tensions have seemingly loosened in recent months, with a phone called placed between Carney and Chinese Premier Li Qiang.

Security concerns notwithstanding, the canola issue is the one I find most fascinating, because it’s seemingly been a tit-for-tat trade issue between Canada and China, and one directly influenced by Canada placing 100% tariffs on Chinese-made EVs in 2024, seemingly at the request of domestic and US manufacturers. Further, China escalated its tariffs on Canadian-made canola up to north of 75% just a few weeks ago.

I get it – the Canadian tariffs on EVs are meant to be a tool in concert with the US to provide North American manufacturers and their R&D departments the time and space to develop and deploy technology and manufacturing prowess to compete against clearly state-subsidized Chinese technology.

Can we catch up, though? China has been investing in EV development for several decades at this point, and their technology is seemingly second to none. Manufacturers with facilities in Canada are paring back at least some of their light duty electrification investments. Chinese EVs, it should be noted, can compete on price against conventional internal combustion engine vehicles without rebates.

Alternate tactics

Are we – Canada – actively going to prevent competitively priced superior technology from entering the country for the foreseeable future? Will Canadians be willing to put up with out-of-date technology? For how long? More importantly these days, should we really keep following what our neighbours to the south are doing?

Minister of Energy and Natural Resources Tim Hodgson, I think, summed it up quite well in his virtual press conference in Germany, on admittedly another climate-related front: “I would say the realities today are quite different than they were two or three years ago.”

Imagine a reality, if you will, that’s something of a middle ground.

One where we ask Chinese companies to invest in Canadian manufacturing facilities – hopefully allaying at least some security concerns – with Canadian personnel, produced for Canadian consumers, using products like Canadian steel.

Maybe, at that point, a ZEV Mandate will be redundant.