- Canada has a 100% tariff on Chinese-made EVs.
- The U.S. currently has a 25% on Canadian-made cars, but the Trump Administration did give Stellantis, Ford and General Motors a one-month break.
- Could Canada embrace the Chinese EV sector, or would the cost to its own industries be too high?
To say the once-steady relationship between the U.S. and Canada has been tested lately would be a severe understatement. President Donald Trump has not only sparked a bitter trade war with one of our oldest and closest allies, but he’s also cracking jokes about outright annexation. So now that America and Canada are at a level of tension not seen since the War of 1812, could Canada turn the screws to the U.S. by welcoming Chinese cars into its market?
It’s not as unrealistic as it sounds. Like the U.S., Canada has a similar 100% tariff on EVs imported from China, announced last August in solidarity with its neighbor to the south. Yet Trump’s attacks on Canada’s industries have changed the equation. As Canada looks outward for new alliances and pivots toward trading partners that appear to be more stable, it’s possible more Chinese EVs and PHEVs could enter the country.
“It’s tempting,” said Robert Karwel, the Director of Customer Success Data & Analytics Division at J.D. Power Canada. Nonetheless, he said, “I fundamentally believe that is still unlikely to happen.”
Photo by: InsideEVs
While some on the U.S. side may cavalierly handwave 25% tariffs on key Canadian industries like cars, dairy products and lumber, the attack on Canada’s industries has galvanized a very real push for divestment and decoupling from the U.S; both in grassroots form from ordinary citizens, but on a policy level implemented by province and Ottawa itself. We’ve already seen Canada’s biggest liquor provider, LCBO, pull all American alcohol from its shelves and bars; could cars be next?
The idea that Canada could pivot to China doesn’t come out of thin air. Some of Canada’s Teslas come from Shanghai, not California or Texas. Canada got the China-made Volvo EX30 before the U.S. did. Kia hasn’t said so yet, but the so-far Canada-only Kia EV5 could end up imported from one of Kia’s China plants. Even BYD had a deal to (re)enter the Canadian market through the side door via a partnership with Uber, although the tariff deal last year nipped that in the bud.
The Canadian market tends to skew toward cheaper and smaller cars than the U.S. It’s the reason why occasionally it gets cars like the Chevrolet Orlando, Nissan Micra, or Mercedes-Benz A-class hatchback. China has plenty of cheap EVs and hybrid cars, so it seems like a match made in heaven.
BYD Seal 06 DM-i plug-in hybrid
But that’s not the whole story, though. Sure, perhaps reasonably priced Chinese cars would find success in Canada (or the U.S.), but a pivot to China in this manner wouldn’t help Canada’s automotive industry, Karwel said.
“(Canada) has massive EV investments by Stellantis, LG Chem, Volkswagen, General Motors Ford, and by Northvolt,” he said. “Canada promised billions, billions only to secure those, those production facilities. We would be shooting ourselves in the foot long term if we then turn around to the Chinese and say, ‘Okay, give us all your BYD Dolphins; give us all your cheap electric cars.’”
Right now, Canada’s entire car industry and supply chain are created to be in support of U.S.-based or oriented ventures. Chinese cars wouldn’t support that, they wouldn’t be buying batteries from Canada’s supply chain or supporting Canada’s EV production intent.
Still, tariffs still have the potential to hurt Canada. According to Karwel, Canadian-made cars may only make up 8% of the U.S. market (not counting any supplier-related parts in other vehicles), and U.S.-made cars are about half of Canada’s.
Essentially, we’re kind of buying all of the cars they make right now, but the bulk of their market comes right from the U.S. Our tariff hurts, but any sort of retaliatory tariff on U.S. imported cars to Canada would likely only continue to hurt both sides. Karwel said he hopes that cooler heads will eventually prevail and that the relationship between Canada and the U.S. will fundamentally remain about the same, with Canada continuing on in its role and EV production goals.
Yet, Karwel also admitted that nothing is set in stone and that things are constantly changing. This only further complicates things for Ottawa, Washington, D.C., and any company with the goal of figuring out how to maneuver with these tariffs. The Trump administration added a 25% tariff on all Canadian goods, then made a carve-out for cars, but only cars from Stellantis, Ford, and General Motors; Honda and Toyota’s production plants were left out of the picture.
Photo by: Photo by Kevin Williams/InsideEVs
Trump has threatened a staggering 250% tariff on new Canadian industries, only further heating up the rhetoric. And Canada just elected a new Prime Minister who has said that Canada will never be part of the U.S, while calls from politicians and citizens alike to divest from America continue to grow. Tesla CEO Elon Musk straight-up called Canada “not a real country,”—despite two of the mothers of his children and his own mom hailing from that country—while some Canadians push the idea for a targeted 100% tariff on Teslas. Add in the additional ending of Canada’s EV subsidy, and cheap cars start looking pretty good.
Chinese EVs might not be on Canada’s roads right now, but the way the U.S. is acting, the thought is becoming pretty tempting indeed.
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