Just a week after Canada announced that it was imposing import tariffs on Chinese electric cars, aluminum and steel, China launched a probe into canola exports from Canada. The probe could potentially lead to China placing import tariffs on key Canadian exports and escalate the trade war between the two nations.
Canada’s decision to levy 100% import tariffs on battery electric vehicles (BEVs) manufactured in China essentially locked the east Asian nation out of the North American EV market, as Chinese electric cars are also subject to 100% import tariffs in the United States. With the European Union levying up to 38% in import tariffs on Chinese electric cars, China is finding it extremely hard to export its affordable EVs to major foreign markets.
Beijing has also noted that it is preparing to file a World Trade Organization (WTO) complaint due to the import tariffs placed on its electric car exports. According to Chinese authorities, the tariffs are unilateral and discriminatory. Furthermore, China has argued that the EV tariffs are in violation of WTO trade policies and are jeopardizing the world’s efforts to adopt renewable energy.
The Canadian minister of agriculture called China’s plans to probe its canola exports “deeply concerning” and noted that government officials are following the situation closely. Electric cars represent a new frontier in the trade war between China and the west, especially since China has all but monopolized the global EV supply chain and is manufacturing affordable electric cars while western carmakers are hemorrhaging money just to stay in the EV market.
The European Union was quick to place import tariffs on cheap Chinese EVs after the vehicles began to flood into EU nations, threatening to outcompete local carmakers in their own markets. President Joe Biden’s administration also erected a massive barrier against Chinese electric cars with a 100% import tariff and made it virtually impossible for China to export its cheap electric cars to two of the largest EV markets on the globe.
Western lawmakers argue that China gamed an “unfair advantage” in the nascent EV market by subsidizing its EV Industry to the tune of hundreds of billions of dollars over the past decade. Coupled with various industrial policies, these subsidies have allowed Chinese carmakers to cut down their EV production costs significantly without compromising on quality.
As a result, Chinese car manufacturers have a major edge over western automakers, which are still saddled with exceedingly high production costs and are currently losing tens to hundreds of thousands of dollars for every electric car sold. Western nations allege that China is now using this advantage to dump its EV surplus in foreign markets where native carmakers cannot hope to compete.
It remains to be seen the extent to which EV makers from the west, such as Lucid Motors (NASDAQ: LCID), will take advantage of the tariffs on China-made electric vehicles in order to gain a bigger share of the market for these vehicles domestically.
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