Major Overhaul of Canadian Trade Policy is Coming

Canadian businesses need to prepare‍

The government has launched a series of broad consultations that are pointing towards some significant tariffs on goods from China and possibly a major overhaul of Canada’s trade policy. Canada’s business community needs to provide input and be ready for big changes ahead.  

• On August 1, Finance Canada wrapped up a 30-day consultation on whether Canada should impose tariffs on Electric Vehicles (EVs) from China. These consultations followed the US announcement it would impose 100% tariffs on China’s EVs, 25% tariffs on aluminum and steel, batteries, medical equipment and other products. Canada’s approach was announced this morning and closely adhere to the American approach.

• On August 9, the Government launched consultations on measures to protect Canada’s economic security in the context of protectionist and non-market policies and other economic threats or coercion by other countries. The key question here is whether Canada will follow the US in cracking down on trade with China in a broad array of products beyond EVs.
• On August 17, the Government launched consultations on the Canada-United States-Mexico Agreement (CUSMA) in preparation for the first joint review of the Agreement in 2026.

What does it mean for Business?

In the immediate term, the Government has announced that it will implement a 100 per cent surtax on all Chinese-made EVs, effective October 1, 2024. 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.

The Government sees this as an important measure to protect the $52.5 billion in supports committed for EV investment according to the Parliamentary Budget Officer. Canada needs to defend the investments from heavily subsidized Chinese competitors.

In the near term, the question is what Canada should do on the other products where US tariffs have been applied. Will the government try to align with the US by imposing a broad series of tariffs on Chinese goods including batteries, semiconductors, and solar cells?

For Canadian business, it is critical to make your case to government to provide them with the real-world information they need to make decisions about tariffs. This also means that if your supply chain depends on Chinese components, it’s time to prepare for the possibility of tariffs or to begin considering other source of supply. If you export to China, you need to think about risks and alternative markets if China retaliates.  As the Deputy Prime Minister said, “We are living in a world right now where China is taking advantage of the global economic system," she added "We know we need to defend our national interest and we will."

This brings us to a broader question though. What is Canada trying to do here? Are we going to ally with the US and build up a “Fortress North America”? Are we deliberately intending to reduce our supply chain dependence on China? Are we going to try to establish these industries in Canada or are we “Friend-shoring”? Or does Canada remain committed to rules-based multilateral trade and reforming the WTO through its leadership in the Ottawa group.

Discover what these new tariffs mean for your business and how to navigate the challenges ahead. Learn how to prepare your supply chain, mitigate risks, and understand Canada’s evolving trade strategy.

‍Read more to stay ahead of these crucial changes here.