Canada’s auto sector is warning that a federal decision to ease tariffs on Chinese electric vehicles could undermine domestic manufacturing and weaken North American supply chains, as executives say the policy puts Canadian jobs at risk.The concerns were raised at a Commons science committee hearing after cabinet approved a quota allowing up to 49,000 Chinese-made battery electric vehicles into the Canadian market this year at reduced tariff levels, with the cap set to increase by 6.5% annually.Industry leaders say the move risks distorting competition at a time when domestic manufacturers are already under pressure.“We all are unafraid to compete, but we need to compete from a level playing field,” said David Adams, CEO of Global Automakers of Canada, which represents companies including Honda, Mazda and Subaru.“We need to cultivate a fair, rules-based environment by which any new entrant, Chinese or otherwise, comes to the Canadian market,” Adams said. “Right now we don’t have that.”He warned the policy could discourage further private sector spending in Canadian auto manufacturing and make it less likely that foreign production would shift into Canada.“It could potentially stifle other investment by existing players in the marketplace,” he said, adding that expectations of Chinese manufacturing relocating to Canada are “probably not likely” without major changes to border and trade policy..The federal government had previously imposed a 100% tariff on Chinese electric vehicles, citing concerns over state subsidies and trade distortions. At the time, former finance minister Chrystia Freeland said China’s industrial policy was designed to overwhelm competitors through overproduction.“China has an intentional, state-directed policy of over-capacity and over-supply designed to cripple our own industry,” Freeland said in 2024 when announcing the tariff.Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, told MPs that Chinese manufacturers benefit from significantly lower labour costs, with wages as low as $3 per hour compared to about $44 in Canada.He also said the sector is heavily subsidized, estimating Chinese government support at roughly US$230 billion since 2009, leading to production far exceeding domestic demand.“Domestic electric vehicle manufacturing and capacity exceeds demand by three times with the surplus product exported and, in many instances, dumped in markets abroad,” Kingston said.He warned the quota — representing about 30% of last year’s Canadian EV sales — could destabilize the industry and weaken the integrated North American supply chain..“The agreement has the potential to undermine Canada’s auto sector and presents risk to the future of the integrated North American auto supply chain,” he said, calling the policy a “major mistake.”Conservative MP Vincent Ho questioned whether the policy benefits domestic manufacturing or simply increases imports at the expense of Canadian jobs.“Does the Liberal government’s decision to import more Chinese-made electric vehicles make Canada a better place to build, or just an easier place to dump product at the expense of Canadian auto jobs?” Ho asked.Kingston responded bluntly that China is not a viable substitute for North American manufacturing integration.“No, absolutely not,” he said. “Our trade relationship is always going to be with the largest economy that is geographically closest to us. We happen to sit beside the largest, wealthiest, most dynamic economy in the world in the United States.”
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