Canada to Apply 25% Surtax on Steel and Aluminum Imports and 100% on China Made EVs

Trade Update • August 26, 2024

ffective October 15, 2024, the Canadian government intends to apply a 25 per cent surtax on imports of steel and aluminum from China. This measure aims to protect Canada’s workers from China’s unfair trade policies and to prevent trade diversion resulting from recent actions taken by Canadian trading partners.

Additionally, effective October 1, 2024, Canada is set to implement a 100 per cent surtax on electric vehicles (EVs) manufactured in China e.g. Teslas. This includes electric and certain hybrid passenger automobiles, trucks, buses, and delivery vans. This surtax will apply in addition to the Most-Favoured Nation import tariff of 6.1 per cent that currently applies to EVs produced in China and imported into Canada.

Economic and Trade Implications

These new trade measures are expected to have significant implications for various sectors. Domestic producers are likely to benefit from reduced competition with cheaper imports, which could lead to increased production and job creation within Canada’s steel, aluminum, and EV industries. However, consumers and businesses that rely on imported goods may face higher costs as the tariffs push up prices for raw materials and finished products.

For the Canadian automotive industry, the 100% tariff on Chinese-made EVs could encourage local manufacturing and investment, but it may also lead to supply chain disruptions and increased costs for consumers in the short term. With EV demand on the rise, these tariffs could prompt manufacturers to look for alternative sources of production or encourage new partnerships within the North American supply chain.

“China has an intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry,” Freeland said. “We simply will not allow that to happen to our EV sector, which has shown such promise.”

The government also announced it will launch a 30-day consultation on whether it needs to take actions to protect what it described as “sectors critical to Canada’s future prosperity” — including batteries and battery parts, semiconductors, solar products and critical minerals.

Quick Facts

Electric Vehicles

• Since 2020, China has emerged as the largest manufacturer and exporter of EVs in the world, and its capacity continues to grow, as a result of policies such as extensive state subsidies and other non-market practices. In 2023, China’s annual EV exports totalled $47.2 billion, up from $0.2 billion in 2018.
  • China’s unfair trade practices include weak standards across EV supply chains, including poor labour standards, a lack of environmental protections, and trade policies supporting oversupply.
  • Connected vehicles containing technology from China also pose significant risks to the privacy of Canadians, their data, and Canada’s national security interests. They collect information from drivers, yet lack transparency on data ownership.

• Canada’s international partners, including the United States and the European Union, have recently responded to unfair competition to their EV industries.
• On May 14, the United States announced that it will increase Section 301 tariffs on Chinese EVs and certain hybrids to 100 per cent.
• On June 12, the European Commission announced that it will begin to apply provisional countervailing (anti-subsidy) duties on Chinese-made EVs on July 4, following a preliminary trade remedy investigation, with final duty rates expected to be finalized in the fall.

Steel and Aluminum

• Despite softening global demand, China has increased its steelmaking capacity by 18.6 million metric tonnes (more than Canada’s total production capacity) since 2018, making it the world’s largest steelmaker with over 1 billion metric tonnes produced in 2023, and similarly, China’s primary aluminum capacity has grown from 11per cent of global production share to 59 per cent over the last two decades, with the government investing up to $70 billion between 2013-2017 alone, according to the OECD.
• • Key likeminded trading partners such as the United States and Mexico have identified similar concerns with Chinese policies and practices in the steel and aluminum sectors. Most notably, on May 14, 2024, the United States announced an increase in its Section 301 tariffs applicable to a range of products imported from China including steel and aluminum.

• Investments in sectors critical to the net-zero transition such as batteries, semiconductors, solar, and critical minerals are also jeopardized by China’s non-market practices.

Questions about the upcoming new surtax and tariffs? Contact us, we’re here to help.