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Canadian Auto Industry Faces 'Death Knell' if 100% Tariff on Chinese EVs Is Removed

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  //automotive-transportation.news-articles.net/co .. ell-if-100-tariff-on-chinese-evs-is-removed.html
  Published in Automotive and Transportation on Saturday, November 15th 2025 at 23:53 GMT by Toronto Star

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Canadian Auto Industry Faces a “Death Knell” if the 100 % Tariff on Chinese Electric Vehicles Is Removed, Experts Warn

When the Canadian government announced the imposition of a 100 % tariff on electric vehicles (EVs) imported from China, it was portrayed as a “protective measure” to safeguard a domestic industry that has already been battered by supply‑chain disruptions, the pandemic, and a rapidly shifting global automotive landscape. Yet a new article in The Star—“Scrapping 100‑tariff on Chinese EVs would be death knell for Canada’s auto industry, experts say”—argues that undoing this tariff could unleash a wave of foreign competition that would collapse the Canadian auto sector in ways that are hard to quantify but inevitable in the long run.

1. The 100 % Tariff: A Quick Recap

The tariff was first introduced in 2022 under Canada’s “Canadian Economic Response” framework, in response to the United States’ own 100 % duty on Chinese EVs. The policy is straightforward: any electric vehicle entering Canada from China will face a duty equal to its fair‑market value. The effect is to push the retail price of a Chinese EV from roughly CAD 25 000–30 000 to CAD 50 000–60 000. For a country where the average new‑vehicle price sits at about CAD 45 000, the difference is a stark, almost prohibitive, markup.

The policy is targeted specifically at the “battery‑electric” segment, which has been growing faster than conventional internal‑combustion‑engine (ICE) vehicles. In 2023, EVs accounted for 14 % of all Canadian vehicle sales, up from 8 % the year before. While the Canadian EV market is still a fraction of the U.S. and European markets, it is expected to double by 2025, driven by aggressive government incentives and a growing consumer base.

2. The Threat to a Domestic Value Chain

Automotive production in Canada is a heavily integrated ecosystem. The auto‑manufacturing cluster in Ontario alone employs more than 100 000 people and is a hub for suppliers ranging from high‑precision CNC machining to battery cell fabrication. The industry is highly export‑oriented; roughly 80 % of the cars assembled in Canada are destined for the U.S. market. A surge in low‑priced Chinese imports could erode that export base.

Dr. Maria Alvarez, professor of Industrial Economics at the University of Toronto, explains: “The Canadian auto supply chain is a network of interdependent firms. A sudden flood of imported EVs undercuts the entire production cycle. Not only do domestic OEMs lose market share, but component suppliers—who rely on the volume to achieve economies of scale—see their margins collapse.”

The article cites a recent analysis by the Canadian Auto Workers (CAW) union that predicts up to 10 % of the sector’s 200 000 workers could be at risk of layoffs within the next two years if the tariff is lifted. The Union’s data indicate that 12 % of jobs are directly tied to assembly lines that would be most affected by a surge in imports.

3. Expert Opinions: A Spectrum of Concerns

1. The “Protectionist” View

A key voice in the piece is that of Peter Lacey, CEO of the Canadian Auto Industry Association (CAIA). Lacey argues that “the 100 % tariff is not a punitive measure but a necessary shield against a market that has been historically subsidised by the Chinese government.” He points out that Chinese automakers—like BYD, NIO, and Xpeng—receive billions of dollars in state subsidies that are not available to Canadian OEMs, creating an uneven playing field.

2. The “Free‑Market” Counterpoint

Conversely, Dr. Rajesh Patel, a senior analyst at the Institute for Advanced Automotive Studies, questions whether the tariff truly protects Canadian jobs. “The tariff may increase domestic EV prices, driving Canadian consumers toward ICE vehicles or foreign‑manufactured ICE vehicles that still have a price advantage,” Patel says. He cites data from the U.S. Department of Commerce indicating that U.S. consumers switched from EVs to ICE vehicles by 30 % in the first half of 2024, in part because of higher prices for Chinese EVs.

3. The “Policy‑Design” Perspective

A third expert, former Minister of International Trade Linda Park, offers a nuanced view. “A blanket 100 % tariff is blunt. A more targeted approach—such as a tariff based on specific component prices or a level‑set subsidy for Canadian EVs—might achieve the same protective effect while keeping prices competitive.” Park underscores that “policy design matters,” and that a “one‑size‑fits‑all” approach risks harming the very sector it intends to save.

4. Economic Context: Beyond the Tariff

The article provides broader context, referencing several external sources:

• US Trade Policy – A link to the U.S. Customs and Border Protection’s announcement of a 100 % duty on Chinese EVs. The U.S. stance is framed as a response to alleged unfair subsidies that distort global markets.

• China’s Retaliation – An article on The Economist discussing how China has imposed its own tariffs on Canadian manufactured goods, such as maple syrup and aerospace components, in retaliation.

• Canadian Tax Incentives – A government policy paper outlining the federal “Canada Greener Homes Grant” and “Plug‑in Car Incentive” programs, which together subsidise roughly 10 % of the purchase price of eligible EVs.

These links help explain the multi‑layered dynamics: while the tariff is a protectionist policy, it also interacts with other trade and subsidy policies that shape the cost and competitiveness of Canadian EVs.

5. Potential Consequences if the Tariff is Removed

5.1 Market Share Loss

If the tariff were lifted, Chinese EVs would return to the Canadian market at prices close to their manufacturing cost, potentially capturing a sizable share of the rapidly growing EV segment. The article projects a 20 % share in 2025, compared with a projected 5 % in the presence of the tariff.

5.2 Cascading Supply‑Chain Impacts

Loss of domestic sales would ripple through the supply chain, reducing demand for key components—battery packs, electric drivetrains, and infotainment systems. The CAW study predicts a reduction in raw‑material purchases by 8 % and a 12 % drop in finished‑goods exports to the U.S.

5.3 Economic and Employment Fallout

In the worst‑case scenario, the article warns, Canada could lose up to 15 000 auto‑manufacturing jobs within five years. The economic multiplier effect—estimated at 1.6 per job in the automotive sector—suggests a potential loss of CAD 25 billion in GDP and a rise in unemployment in manufacturing hotspots.

6. Policy Recommendations

The article concludes with a set of policy options:

1. Maintain the 100 % Tariff – The most straightforward solution, preserving current protection for domestic producers.

2. Gradual Phase‑In of Tariff – Apply the tariff to a subset of Chinese EVs that are most competitive, while gradually expanding scope.

3. Complementary Subsidies – Introduce a targeted subsidy for Canadian EVs to offset the price differential created by the tariff.

4. Investment in Domestic Production – Provide public funding for battery‑cell manufacturing and advanced driver‑assist technology to raise domestic competitiveness.

5. Multilateral Negotiations – Seek an agreement within the Canada‑United States‑Mexico Agreement (USMCA) to harmonise EV tariffs, reducing the risk of trade wars.

7. A Cautionary Tale

Ultimately, The Star article paints a stark picture: the Canadian auto industry, once a pillar of the national economy, now sits on a fragile cliff. If the 100 % tariff on Chinese EVs is removed, experts argue, the sector could fall. The narrative is not about punitive tariffs per se, but about the delicate balance of price, subsidy, and supply‑chain integration that determines the survival of a complex industrial ecosystem.

The article urges policymakers to tread carefully, to recognise that the “death knell” it references is not a mere rhetorical flourish but a realistic risk based on data, expert testimony, and the interconnectedness of today’s global automotive markets. Whether Canada can preserve its auto heritage while embracing a rapidly electrified future remains a question of policy, strategy, and, ultimately, how the government chooses to support its industry in an era of geopolitical trade tensions and technological disruption.