Facing ‘Determined’ White House, Canada May Realign Its EV Tax Incentives

Trade Update • DECEMBER 14, 2021

UUnswayed by lobbying efforts from disadvantaged automakers and escalating threats of retaliation from Canada and other major U.S. trading partners, the Biden administration on Monday defended the electric vehicle tax provisions in its “Build Back Better” legislation, saying it was “determined to get it passed and bring down everyday costs for the people of our nation.”

“It doesn’t appear that Canada’s lobbying efforts have changed any minds at the White House,” one press report dryly observed.

Meanwhile, preliminary text for the sweeping infrastructure bill released over the weekend includes a $4,500 credit for electric vehicles domestically produced in unionized facilities. The same provision was included in the House version of the bill passed in November.

White House Position Unchanged

In a short press conference on Monday, White House Press Secretary Jen Psaki said she didn’t expect “any additional policy” or “changes” in light of Canada’s threat to retaliate against the proposed measures.

“The president advocated for these tax credits because he wants to make it more affordable for the American people to purchase electric vehicles and because he feels it’s an area of a huge opportunity — an industry of huge opportunity for American automakers,” Psaki said.

“We have a good working relationship with the Canadians,” she added, noting that President Biden and Prime Minister Trudeau had a “good conversation” about the issue during the North American Leaders’ Summit last month.

On the same day, Vice President Kamala Harris visited an EV maintenance facility in Maryland to unveil the administration’s action plan aimed at supporting the development of 500,000 electric vehicle charging stations across the nation. In her speech, Harris touted the proposed incentives in the Build Back Better Act, saying that both she and President Biden were “confident” the Senate will pass the bill.

Ottawa Looking for Solutions

Seeking to avert a potentially costly trade war over the issue, this week Trudeau said Ottawa would be willing to “align” its own electric-vehicle incentives with those being offered by Washington provided it could be assured that Canadian-built cars and trucks would be eligible for the Biden administration’s proposed tax credits.

Trudeau told a news conference that the cross-border alignment of tax schemes was one of “a number of solutions we’ve put forward” and said that government officials “are working very hard with the United States on getting them to understand that this proposed EV rebate for American-built cars only is not good, obviously, for Canada, but also not good for the United States.”

EV Provisions Still Not a Sure Thing

Conservative-leaning Senator Joe Manchin, a crucial vote in passing Biden’s economic agenda, spoke out against the proposed EV tax credits during a Toyota event last month in his home state of West Virginia, calling them “wrong” and “not American,” according to Automotive News. Like many foreign-based automakers, Toyota’s U.S. plants are not unionized, making electric vehicles made there ineligible for the $4,500 credit.

Another factor that could put Biden’s EV tax scheme in jeopardy would be a negative ruling from the Senate parliamentarian under the reconciliation process if the measures are deemed to be violating the so-called Byrd Rule, which prohibits provisions not considered as “germane” to the budget.