Canada argues new US Electric Vehicle Tax Credit Plan could violate trade pact

According to reporting by Reuters, Canada penned a letter to the Biden administration expressing concern that a US proposal to create new electric vehicle tax credits for American-built vehicles could harm the North American auto industry.

The letter also stated that the proposed tax credits could also violate the Canada-United States-Mexico (CUSMA) trade deal.

According to the report the Minister of Small Business, Export Promotion and International Trade of Canada Mary Ng wrote a letter to the Biden administration on the program.

The letter notes the credits would have a significant adverse impact on the future of EV and automotive production in Canada.

It further says there is a substantial risk of economic harm, and tens of thousands of job losses could happen.

However, Minister Ng noted that as the two counties enjoy an integrated auto industry the US may face similar job losses.

A US House panel approved legislation to boost EV credits to $12,500 per vehicle back in September. This includes $4,500 for US-made cars and another $500 for batteries made in the US. Starting in 2027, vehicles assembled in the US will qualify for all $12,500 in tax credits. The legislation still needs to move through both houses of Congress.

Canadian lawmakers are confident a solution to the proposed legislation can be found without launching a CUSMA or WTO challenge.

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