The recent implementation of tariffs on Chinese electric vehicles, aluminum, and steel in Canada is estimated to have a significant impact on federal revenues. The Parliamentary Budget Officer anticipates an increase of $473 million over the course of five years due to these tariffs.
The decision to impose a 100% tariff on Chinese-made EVs and a 25% tariff on steel and aluminum imports was initiated by the federal government in October. This move was motivated by concerns over unfair trading practices and inadequate environmental and labor standards in China, which have enabled the country to flood the market with products at the expense of both the environment and workers.
Pressure from industry groups, particularly automakers, as well as steel and aluminum plants, played a crucial role in Canada’s decision to align its tariffs with those imposed by the United States.
According to the PBO’s estimates, these tariffs are expected to lead to a significant decrease in the imports of aluminum and steel from China, projecting a 50% reduction. Furthermore, the soaring imports of EVs from China in 2023, largely driven by Tesla’s decision to fulfill Canadian orders from its plant in Shanghai, are also expected to be impacted. The PBO suggests that Tesla might shift its focus to selling vehicles in Canada that were produced outside of China.
The implementation of these tariffs is seen as a strategic move to protect Canadian industries and workers from unfair trade practices while also generating substantial revenue for the government. As Canada continues to navigate the complexities of global trade, these tariffs serve as a crucial tool in maintaining a fair and sustainable economic environment.
