Canada to impose surtax on Chinese EVs, steel and aluminum

Executive summary

Canada has announced an intent to impose a 100% surtax on Chinese EVs and 25% surtax for Chinese steel and aluminum products.

The federal government has announced, as of Oct. 1, it will impose a 100 per cent surtax in addition to any existing customs duties on imports of Chinese electric vehicles (EVs). These EVs include electric and certain hybrid passenger cars, trucks, buses and delivery vans. On Oct. 15, a 25 per cent surtax in addition to any other import duties will be imposed on imported Chinese steel and aluminum products. A final list of impacted products is anticipated to be released on Oct. 1.

EVs, steel and aluminum production appear to be areas of interest for the federal government as the import surtax joins domestic measures to support these industries, such as the proposal as part of the 2024 Federal Budget for an EV Supply Chain investment tax credit.

In support of the surtax, the government has cited China’s “intentional, state-directed policy of overcapacity and oversupply” and “lack of rigorous labour and environmental standard” which depress prices of Chinese-made EVs, steel and aluminum and prevent manufacturers in more regulated production environments like Canada from effectively competing with imports. Canada additionally referred to actions of its major trade partners as support for its own tariffs.

China has criticized the import surtax proposals as discriminatory and has announced it will be conducting an anti-dumping investigation into imports Canadian canola and certain Canadian chemical products. This investigation could lead to import controls or duties which dampen sales of Canadian canola and other impacted Canadian products in China. Canadian exporters selling these goods into China should consider exploring other markets to lessen reliance on Chinese sales.

Importers, distributors and domestic producers looking to prepare for the potential surtax should review the full list of EVs and steel and aluminum products proposed to be impacted and consider making representations to the Department of Finance if the surtax will adversely impact their business. In addition, the government is engaging in a 30-day consultation exploring other sectors, such as batteries and battery parts, semiconductors, solar products and critical minerals, which may benefit from similar measures.

Please contact your RSM Trade Advisory team for further information and assistance.