A new energy vehicle (NEV) assembly line of BYD, China's leading NEV manufacturer, at its plant in Zhengzhou, central China's Henan Province, April 24, 2024. /Xinhua
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Canada announced on Monday that it would impose a 100 percent tariff on imports of Chinese electric vehicles (EVs) starting October 1 and a 25 percent tariff on its steel and aluminum from October 15. "Actors like China have chosen to give themselves an unfair advantage in the global marketplace," Canadian Prime Minister Justin Trudeau said.
True, Chinese EVs, which could be sold for as little as $12,000, have a notable cost advantage, but this is a result of the country's supply chain integrity, industrial concentration, and cheaper labor, etc., not "unfair subsidies." According to the International Energy Agency, China processes more than half of the world's lithium, cobalt, and graphite – all essential materials for making batteries. The country's high production capacity of batteries, which are by all metrics the most important components of EVs, has tremendously reduced the costs of Chinese EVs.
In addition, China, with its complete industrial system, is known as the world's manufacturing powerhouse. The country's EV industrial chain is fully-fledged covering research and development, engineering design, manufacturing and assembly. The growing number of EV clusters in China, including Hefei in Anhui Province and Changzhou in Jiangsu Province, means Chinese automakers can save costs in logistics, land use and labor.
Robots weld bodyshells of cars at a workshop of Chinese electric vehicle (EV) maker Li Auto Inc. in Changzhou, east China's Jiangsu Province, January 10, 2024. /Xinhua
More importantly, China's lead in the global EV marketplace is not just about costs. Constant tech innovations also contribute to the worldwide popularity of Chinese EVs. For instance, Chinese EV brand Zeekr's batteries can go from a 10 percent to an 80 percent charge in just 10.5 minutes, according to media reports. Chinese vehicles are "simply good cars and people buy them," the Financial Times quoted Mathias Miedreich, CEO of Umicore – headquartered in Belgium, as saying.
Against Canadian Deputy Prime Minister Chrystia Freeland's allegation that "China has an international state-directed policy of overcapacity and oversupply designed to cripple our (Canadian) own industry," China is playing by the same WTO rules with the rest of the world. It is Canada, instead, that is ignoring WTO rules and undermining normal trade cooperation between countries.
Ottawa's announcement of tariffs, rather than an attempt for fairness, is a politically motivated act. It is worth noting that Trudeau's decision, matching U.S. and European tariffs, came after a meeting with U.S. national security advisor Jake Sullivan, who told reporters on Sunday that "the U.S. does believe that a united front, a coordinated approach on these issues benefits all of us."
Apparently, against the backdrop of intensifying rivalries between Beijing and Washington, Ottawa has decided to dance to the U.S. tune in disregard of objective facts and WTO rules. Canada "had to go with the U.S. position, when you think about the economic integration that we have with the U.S. More than 75 percent of our exports go to the U.S.," former Canadian ambassador to China Guy Saint-Jacques was quoted by AFP as saying.
To court Washington, Ottawa has chosen the wrong path of politicizing economic and trade issues, a dangerous move that will harm, rather than protect, Canadian customers. To begin with, Canada is not among the top export markets for Chinese EVs. This means that while Ottawa's tariffs would exert limited impacts on Chinese firms, Canadian customers would eventually pay extra costs for high-quality Chinese vehicles.
In addition, cooperation is vital in the development of the EV industry. In this context, shutting the door against China will cripple the competitiveness of Canadian firms. Moreover, while the international community is urging for coordinated actions against climate change, Ottawa's tariffs on EVs will inevitably thwart the global transition to the green economy.
Shouting fairness, Ottawa is abusing tariffs for political calculations. If the Trudeau government is sincere in positioning Canada as a key part of the global EV supply chain, it needs to put more efforts into research and innovation. But regrettably, Ottawa has resorted to erroneous practices of politicizing trade issues – under the guise of trade fairness.
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