PE Ledger

Canada threatens the United States with tariffs and a partial suspension of CUSMA over a tax credit for electric vehicles

An American & Canadian flag waving in the wind.

In a letter to US senators, Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng issued a threat.

Deputy Prime Minister Chrystia Freeland has written to top US senators, threatening to halt parts of the CUSMA trade pact and apply duties on American goods unless the US backs down on a proposed tax credit for American-built electric vehicles.

“We are extremely concerned that some sections of the proposed Build Back Better Act for electric car tax credits would contravene the United States’ responsibilities under the US-Mexico-Canada Agreement,” Freeland and International Trade Minister Mary Ng write in the letter.

According to the letter, “the plan is comparable to a 34% levy on Canadian-assembled electric automobiles.” “The plan is a de facto abrogation of the USMCA and poses a substantial threat to the Canadian automobile industry.”

In the United States, the Canada-U.S.-Mexico Agreement (CUSMA) is known as the United States-Mexico-Canada Agreement (USMCA).

 Chrystia Freeland and Trade Minister Mary Ng

Congress is proposing large tax credits worth up to $12,500 for owners of new electric vehicles made in the United States, as long as the cars are made by union employees.

Experts believe that the tax would be devastating to Canada’s automobile industry, which is attempting to attract fresh investment as it transitions away from internal combustion engines.

Freeland and Ng emphasise the integrated structure of the North American automotive industry in a letter to Senate Majority Leader Charles Schumer and Senate Minority Leader Mitch McConnell, as well as six other senators who sit on key Senate committees.

The letter states, “We have been making vehicles together for almost 50 years.” “Approximately 50% of Canadian-assembled vehicles are made in the United States, while Canada imports over $22 billion in automotive parts from the United States each year.”

Tariffs are being resurrected as a menace.

Senators are urged to “not discriminate against” Canada and to collaborate on the development of electric vehicles in a way that does not jeopardise the integrated continental automotive industry.

“There is no suitable resolution to this situation, Canada will defend its national interests, just as we did when we faced unfair tariffs on Canadian steel and aluminium,” the letter states.

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