PE Ledger

Saturday, December 4, 2021

How Canada might retaliate if the United States adopts a tariff-like electric car policy

Some say that fighting US climate policies with trade retaliation is ‘politically dangerous.’

According to both Canadian environmentalists and trade experts, a new US government policy that grants tax incentives for electric vehicles and batteries created by unionized labour in the US puts Canada in a tough situation.

Many people fighting climate change on both sides of the border praised the “Build Back Better” project passed by Congress at the end of last week.

The proposal is seen as a significant step toward luring gas-powered automobiles — and their emissions — out of the market by offering an effective $12,500 US rebate if American people buy an electric vehicle rather than one with a regular engine.

A high tariff, for example

However, Canadian economic nationalists fear that if the subsidy is limited to American-made automobiles as planned, it will force Canada out of the EV manufacturing market, resulting in a negative impact on well-paying Canadian jobs.

It could potentially destabilize North America’s tightly linked automobile supply chain, with ramifications in the United States.

“Any cars manufactured in Canada would not be eligible for the subsidies and would be significantly more expensive. In some ways, it would be similar to levying a high tariff, “Patrick Leblond, a professor, outlined the situation.

It means that buying an equal or similar car built in Canada would cost thousands of dollars more for Americans, who make up the great majority of North American vehicle consumers.

Existing internal combustion engine plants in Canada may not be affected, but that could change as automakers construct new operations. And the Buy American policy may now have an impact on those plans.

“Clearly, the large carmakers would build their plants in the United States rather than in Canada,” Leblond added.

And, similar to when Donald Trump imposed tariffs on Canadian steel, aluminium, and forest products, some argue that Canada should consider how it can counter-threat, possibly by releasing a list of products made in the United States but not in Canada that would be subject to tariffs if the tax credit is implemented.

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