Canada reviews tariffs on Chinese electric vehicles

The Canadian government is reviewing the 100% tariff on Chinese electric vehicles introduced in October 2024. This decision could dramatically change the situation in the Canadian automotive market, making electric vehicles more affordable for consumers, but also creating serious risks for the domestic automotive industry.

Dramatic Drop in Electric Vehicle Sales

The main reason for reviewing the tariff policy was the catastrophic drop in electric vehicle sales in Canada. According to Statistics Canada, sales of fully electric vehicles fell by 39.2% year-on-year in the second quarter of 2025. Sales of plug-in hybrids also decreased by 2.2%, although conventional hybrids showed a 60.7% growth.

Electric vehicles accounted for only 8.6% of all new cars sold in the second quarter, compared to 18.3% in the same quarter last year. This sharp decline is largely due to the end of federal and provincial electric vehicle purchase subsidy programs in 2025.

Public Support for Tariff Removal

A Nanos Research study for CTV News showed that 62% of Canadians support or somewhat support reducing or eliminating the 100% tariff on Chinese electric vehicles. Detailed survey results show that 29% of respondents fully support this measure, while 33% somewhat support it. Only 29% of Canadians oppose or somewhat oppose such a decision.

Support for tariff reduction is particularly understandable in light of the price situation in the market. Currently, there are virtually no electric vehicles in Canada priced below $45,000 CAD, while some Chinese models, such as the BYD Seagull, have a base price of around $18,500 CAD before tariffs and shipping costs.

Official Government Position

Agriculture Minister Heath MacDonald confirmed that the tariff review is under consideration:

"The Prime Minister did say that there's a review of the EV policy. We'll see where that goes... discussions are ongoing."

It's important to note that the decision to remove or reduce tariffs is being considered not only in the context of the automotive industry but also as part of a broader trade strategy. In response to Canadian tariffs on electric vehicles, China imposed 100% tariffs on Canadian rapeseed meal, rapeseed oil, and peas, as well as lower tariffs on other key export goods.

Impact on the Agricultural Sector

Canada exported $4.8 billion CAD worth of canola and related products to China in 2024 and is also a major supplier of soybeans, barley, peas, and meat. Removing tariffs on Chinese electric vehicles could help Canadian farmers gain access to one of the world's largest markets.

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Minister MacDonald emphasized:

"We're in a delicate position, but we're here to support farmers first and foremost, and if that decision has to be made, it will be made."

Impact on Traditional Automakers

Removing tariffs on Chinese electric vehicles will significantly impact sales of traditional automakers in Canada. American brands Ford, General Motors, and Chrysler, which are already facing difficulties in the electric vehicle sector, will be particularly vulnerable.

Tesla, which was the leader in the Canadian electric vehicle market, is already experiencing serious pressure. Tesla's sales in Canada dropped sharply after the company raised prices following the end of the subsidy program. Additionally, Canadians' negative attitude towards Elon Musk due to his ties with Donald Trump has further worsened the brand's position.

Japanese automakers Toyota and Honda may also suffer, especially given their slow development in the electric vehicle sector. Honda plans to offer an electric vehicle based on the GM Ultium platform in 2024, but this may not be enough to compete with cheap Chinese models.

Korean manufacturers Hyundai and Kia may be in a better position thanks to their already developed line of electric vehicles and competitive prices, but they will also have to face serious price pressure from Chinese competitors.

Automotive Industry Warnings

Despite potential benefits for consumers and agriculture, automotive industry representatives express serious concerns. Brian Kingston, President and CEO of the Canadian Vehicle Manufacturers' Association, stated that tariffs on Chinese electric vehicles were "absolutely" the right decision.

Kingston warned:

"China has the capacity to produce nearly 80% of global car demand. There's a huge risk if these vehicles flood the Canadian market." He notes that Canada has attracted over $61.2 billion CAD in investments in the electric vehicle industry since 2020, and allowing Chinese electric vehicles could jeopardize these investments.

Mexican Experience as a Warning

Experts cite Mexico as an example, where five years ago electric vehicles accounted for about 4% of car sales, and now it's about a third of new vehicles, which forced Mexico to raise the tariff on Chinese electric vehicles from 20% to 50%. This example demonstrates how quickly Chinese manufacturers can capture the market in the absence of trade barriers.

A similar situation is observed in other regions of the world. In Europe, Tesla is already facing serious competition from Chinese brands. Tesla's sales in Europe fell by 40% in July 2025, while sales of Chinese BYD grew by 225% in the same period. In China, Tesla's share of the electric vehicle market fell from over 16% in 2022 to just 4.3% in February 2025.

Potential Consequences for the USA

There are also concerns about possible retaliation from the USA. Experts warn that removing tariffs could provoke countermeasures from the US, as it could threaten the positions of major American automakers who have not yet faced serious competition from Chinese electric vehicle manufacturers.

American automakers Ford and GM have already expressed concern about growing competition from Chinese companies. Ford estimates losses from investments in electric vehicles at up to $7.3 billion CAD in 2023 and expects even tougher competition in the future from more affordable Tesla models and Chinese automakers.

Economic Prospects and Alternatives

Economist Julian Karagezian from McGill University in Montreal believes it's time to reconsider tariffs on China:

"I really think we're quietly thinking about easing some of these measures. And I really think we should do it."

Karagezian suggests that Canada could develop its electric vehicle industry by inviting Indian and Chinese manufacturers along with American and European operators to set up factories in Canada. He argues that Canada's position against China was largely aimed at appeasing the USA.

Current Situation in the Electric Vehicle Market

The current situation in the Canadian electric vehicle market is characterized by several key issues. First, the high cost of available models — most electric vehicles cost more than $45,000 CAD. Second, the end of subsidy programs has made buying electric vehicles even less affordable for average Canadians.

Prime Minister Mark Carney recently suspended the government's goal of having zero-emission vehicles make up 20% of new car sales by 2026. The broader mandate required that by 2035, every new car sold in Canada must be zero-emission.

Impact of the Trade War with the US

The situation is complicated by the ongoing trade war between Canada and the US. President Donald Trump imposed tariffs on Canadian goods, including steel and aluminum used in car manufacturing. This puts additional pressure on the Canadian automotive industry and may influence the decision on Chinese tariffs.

Moreover, negative attitudes towards Elon Musk, whose Tesla cars were among the best-selling electric vehicles in Canada, are also affecting public opinion. Some politicians are even suggesting imposing 100% tariffs on Tesla vehicles in response to Trump's actions and Musk's stance.

Outlook and Possible Scenarios

The decision on tariffs for Chinese electric vehicles will have far-reaching consequences for various sectors of the Canadian economy. On one hand, removing tariffs could boost electric vehicle sales, make them more affordable for Canadians, and help achieve the country's environmental goals.

On the other hand, such a decision could harm Canada's growing automotive industry, especially in electric vehicle production, where significant investments have been made by companies like Stellantis, LG Chem, Volkswagen, General Motors, Ford, and Northvolt.

The government has not yet announced a specific timeline for making a final decision on this issue. However, ongoing discussions and public support for removing tariffs suggest that changes in tariff policy are likely in the near future.

Regardless of the decision made, the situation with tariffs on Chinese electric vehicles is a clear example of the complexity of modern international trade, where economic, environmental, and geopolitical factors are closely intertwined and require a balanced approach to decision-making.