A new report from Royal Bank of Canada says Canadian tariffs on Chinese steel, aluminum, and electric vehicles will do little to stem imports, but will increase costs for consumers and might trigger further trade sanctions from China.The RBC report penned by Salim Zanzama Sept. 3 says prices of electric vehicles (EVs) will rise in the short term."Importantly, the Canadian move raises the risk of retaliation from Beijing, which could put exports of Canadian commodities at risk, as seen with the newly announced probe on Canadian canola exports," Zanzama writes..On August 26, the Canadian government announced it will impose steep a 100% import tariffs on Chinese EVs starting October 1, and a 25% tariff on aluminum and steel products from China effective October 15.The federal government justified the move as a measure to protect jobs and investments in the country in the face of unfair competition. This decision follows similar actions by the United States and the European Union.The federal government is also launching a 30-day consultation on the threat Chinese imports pose to other industries deemed “critical to Canada’s future prosperity”, such as batteries and their parts, semiconductors, solar products, and critical minerals. More tariffs could follow.The Canadian government along with Ontario and Quebec have sunk $52 billion into developing a Canadian domestic EV supply chain."Imposing new tariffs up the supply chains at this time — when most Canadian EV production capabilities still aren’t operational — would lead to broader cost pressure in the short term given China’s large presence in the global EV supply chain. It could also challenge one of Canada’s climate targets of electric cars making up 60% of new vehicle sales by 2030, and 100% by 2035," warns RBC.Canada ranks in the top five nations for aluminum production and is also a top 20 steel producer. The tariffs on China will only affect 0.3% of all total Canadian goods imports. However, since 2020 over one-fifth of Canadian aluminum imports have come from China, and in 2023, Chinese steel accounted for 8.1% of total steel imports..The tariffs will cause a speed bump for the adoption of EV's, according to Zanzama."Although the initial direct economic impact is expected to be small, the tariffs are likely to raise consumer prices for EVs in the short term — or prevent them from falling more rapidly — potentially slowing their adoption in Canada," writes the RBC economist."A possibly greater impact may result from the risk of retaliation and a wider trade conflict," he adds.China said on Tuesday it plans to start an anti-dumping investigation into canola imports from Canada. The move lifted prices of domestic rapeseed oil futures to a one-month peak."China strongly deplores and firmly opposes the discriminatory, unilateral, restrictive measures taken by Canada against its imports from China despite the opposition and dissuasion of many parties," a Chinese Commerce Ministry spokesperson said in a statement.Trade Minister Mary Ng said Ottawa was following the matter closely."Our government will always defend Canada's national interest, especially our hardworking farmers and producers — the backbone of our agriculture sector," she said.More than half of canola produced in Canada goes to China, the world's biggest oilseed importer.
