After Canada considered imposing new tariffs on Chinese electric vehicles (EVs), the country has now announced a 30-day consultation period to examine the possibility of imposing tariffs on them. 

The action of a 30-day consultation period arrives after Deputy Prime Minister and Finance Minister Chrystia Freeland, aligns Canada with recent actions taken by the United States (U.S.) and the European Union (EU) to address concerns over China’s EV subsidies. 

Moreover, the consultation is set to start on July 2 and aims to investigate what Freeland described as “China’s intentional, state-directed policy of overcapacity” in the EV sector. Furthermore, the Canadian government claims that this oversupply is being shipped abroad, undermining EV global producers and threatening the competitiveness of Canada’s automotive landscape. “Canadian auto workers and the auto sector are facing unfair competition,” Freeland stated during the announcement in Vaughan, Ontario. 

In addition, the consultation will also consider potential changes to Canada’s federal EV purchase rebate program, which currently offers up to $5,000 per vehicle, and examine possible expansion of investment restrictions in Canada.

Canada’s decision has been brewing for a while as Prime Minister Justin Trudeau and his cabinet are in the early stages of discussing how and when to proceed with these tariffs according to Bloomberg. Notably, Canada’s decision follows similar actions by its allies, where the United States (U.S.) recently announced plans to increase tariffs on Chinese EVs from 25% to 100%, while the European Union (EU) is set to impose new tariffs up to 38.1% on Chinese-made EVs starting July 4. However, it was recently reported that the EU and China are entering negotiations on the aforementioned tariffs.  

Currently, the only Chinese-made EVs imported into Canada are Teslas produced at the company’s Shanghai plant. However, China plays a major role in Canada’s EV supply chain, particularly in batteries and battery components. Additionally, China is Canada’s second-largest trading partner, making the situation complicated.

As the consultation process unfolds, the global EV industry is certainly going to see an impact that will reflect on trade relations depending on Canada’s decision. As Canada becomes the next in line after the U.S. and the EU about tariffs on Chinese EVs, the broader global EV market will be determined in the next 30 days. 

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