How Canada’s policy toward tariffs on Chinese electric vehicles (EVs) might evolve

Current Baseline

First, the starting point:

• Canada has already imposed a 100% surtax on EVs manufactured in China, effective October 1, 2024.

• That measure was justified by the Canadian government on the grounds that China engages in unfair, non-market practices, overcapacity, weak labor or environmental standards, and state subsidies that distort competition.

• China retaliated with tariffs on Canadian agricultural and food exports (e.g. canola, peas, pork, aquatic products) starting March 20, 2025.

• Canada also imposed 25% surtaxes on steel and aluminum from China.

• Canada has solicited consultations and policy responses to what it calls “unfair Chinese trade practices” in critical sectors including EVs, batteries, semiconductors, etc.

So Canada is currently in a posture of strong protectionism vis-à-vis Chinese EVs. The question is: will that posture soften, intensify, or be adjusted?

Key Factors That Will Shape Future Policy

Here are the main pressures and constraints that will likely influence Canada’s direction:

1. Domestic auto and EV-industrial capacityCanada will want to support its domestic EV and battery supply chains, both to preserve jobs and to build competitive advantage. That gives political motivation to maintain protective measures for an extended period.

2. Consumer / climate goals tensionThere is tension between wanting more EV adoption (for climate goals) and keeping tariffs that make EVs more expensive. Pressure from environmental groups, provincial governments, and consumers may push Canada to reduce barriers over time.

3. Retaliation risk / trade diplomacyChina’s retaliatory tariffs already hit key Canadian exports (especially agricultural). Continued tariffs on Chinese EVs may provoke further escalation, harming Canadian farmers and exporters. Canada may have to weigh those diplomatic and economic costs.

4. Alignment with U.S. and global trade alliesCanada tends to align its trade policies with the U.S. and sometimes the EU when concerns about China’s market practices arise. If the U.S. keeps or increases its restrictions on Chinese EVs, Canada may feel pressure to stay in step to avoid arbitrage.

   

5. WTO / legal constraintsCanada must be cautious about violating WTO rules or exposing itself to successful legal challenge. If China’s WTO complaint against Canada’s EV tariffs gains traction, Canada might have to moderate or better justify its measures.

6. Supply chain shifts and Chinese investmentChinese EV makers might try to establish assembly or battery plants in Canada or nearby (or use local partnerships) to circumvent tariffs. Canada might create carve-outs or conditions (e.g. local content requirements) rather than outright bans.

7. Changes in political leadership / public opinionA future Canadian government more oriented toward trade liberalization might be more willing to scale back tariffs if the perceived industrial threat diminishes or if trade pressures intensify.