Prime Minister Justin Trudeau announced Aug. 26 that Canada will impose a 100 per cent tariff on Chinese EVs and a 25 per cent tariff on steel and aluminum.

The tariff on Chinese EVs will take effect Oct. 1, while steel and aluminum tariffs will come into place Oct. 15.

Finance Minister Chrystia Freeland cited unfair trading practices but also abysmal environmental and labour standards that she said allow China to unfairly price and dump products into the market at a huge cost to the environment and workers. The tariffs were announced following a month-long consultation process, which is required under Canadian law.

The move by the Liberal government follows similar tariffs announced by the U.S. in the spring, though those have yet to take effect. Canada was under immense pressure to match the U.S. tariffs, pushed by industry groups including automakers, and steel and aluminum plants.

China says it is extremely dissatisfied with the Canadian tariffs and promises to take the case to the World Trade Organization.

Chinas attitude is very clear and we will take all necessary measures to defend the legitimate rights and interests of Chinese companies, the ministrys release said in Mandarin. 

The Canola Council of Canada released a statement calling China an important and valued market for Canadian canola.

We are confident that an investigation into Canada’s canola trade with China will demonstrate alignment with and reinforce our support for rules-based trade, said Chris Davison, president and CEO of the council.

Statistics published by the council show China accounted for 75 per cent of canola seed exports from Canada between January and June.

China has targeted Canadian canola before. In 2019, it barred canola seed imports from two major Canadian companies, alleging it had detected pests in their shipments. The canola ban took place amid heightened tensions between the two countries following the Canadian detention of Huawei executive Meng Wanzhou at the request of the United States, and Chinas subsequent detention of two Canadian men. 

Canada launched a WTO challenge in 2020, but the review panel was suspended in August 2022, three months after China reinstated shipments of Canadian canola.

An RBC report released Tuesday said Canadas planned tariffs are expected to raise EV prices in the short term and raise costs on industries that use aluminum and steel. 

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, wrote RBC economist Salim Zanzana. 

The federal government has also announced a 30-day consultation period to consider the threat of Chinese imports in other sectors, including batteries and battery parts, semiconductors, solar products, and critical minerals.

Zanzana says the federal government is clearly trying to protect the investments it has made in partnership with the Ontario and Quebec governments in the EV supply chain, which total about $52 billion. 

However, imposing new tariffs up the supply chains at this time — when most Canadian EV production capabilities still arent operational — would lead to broader cost pressure in the short term given Chinas large presence in the global EV supply chain. It could also challenge one of Canadas climate targets of electric cars making up 60 per cent of new vehicle sales by 2030, and 100 per cent by 2035, the report said.