100% Surtax on Chinese Electric Vehicles

Summary#

The federal government has made the China Surtax Order (2024). It imposes a 100% surtax on certain goods that originate in China and are imported into Canada, starting October 1, 2024. Goods in transit to Canada on that day are exempt.

What it does#

• Imposes a surtax of 100% of the value for duty on goods that originate in China and are classified under the tariff items listed in the order’s schedule.
• The surtax is charged in addition to the normal Most-Favoured Nation tariff of 6.1% that applies to these goods.
• The order came into force on October 1, 2024, and exempts goods already in transit to Canada on that date.
• The measure is to be implemented by the Canada Border Services Agency.
• The government intends to review the measure within about one year of it taking effect.

Who's affected#

• Canadian automakers and auto parts suppliers who compete with imported electric vehicles (EVs).
• Importers, dealers and distributors of EVs made in China.
• Consumers who were considering or planning to buy Chinese-made EVs (these vehicles will become much more expensive to import).
• Industries that supply EVs, such as steel, aluminum and battery makers, because the order aims to protect their market share.
• The measure will be administered by the Canada Border Services Agency and was developed by the Department of Finance.
• The government’s analysis says it does not create new paperwork for small businesses.

Why it matters#

• A 100% surtax is likely to make many Chinese-made EVs prohibitively expensive to import. That will sharply reduce Chinese EV imports into Canada.
• The government says the surtax is meant to protect Canadian investments in EV production (about $44 billion in announced investments) and Canadian workers from a surge of low-cost Chinese imports.
• Consumers may see fewer low-cost Chinese EV options, which could slow EV adoption in the short term.
• Imports may shift to other countries (including those with free-trade deals with Canada), which could enter duty-free instead.
• The surtax will reduce duties collected on Chinese EVs (the government cited about $139.8 million in duties in 2023), but is intended to preserve longer-term domestic industry growth.
• The measure aligns Canada with actions by other partners such as the U.S. and the EU, which have taken similar steps on Chinese EVs.