Canada threatens tariffs and more over US EV Tax Credit

Canadian Deputy Prime Minister Chrystia Freeland wrote to top US Senators to inform them that Canada would respond in kind if a proposed US EV tax credit moves forward. The response would include suspension of parts of the USMCA trade agreement. In addition Canada would impose tariffs on US goods sold in Canada.

The letter also noted that the Build Back Better Vehicle Act would violate the United States obligation under the USMCA. As per the letter, the proposal is equivalent to putting a 34 per cent tariff on Canadian-assembled EVs.

The US Build Back Better Vehicle Act proposes a $12,500 tax credit on EVs bought by Americans that union workers in the US manufacture.

The pointed letter was sent to Senate Majority Leader Charles Schumer and Senate Minority Leader Mitch McConnell. In addition, six other Senators who sit on key Senate committees also received the letter.

The letter also notes that Canada will publish the list of US products that would face Canadian tariffs if the Act passes. Canada will publish the list in the coming days if the government does not see a satisfactory resolution.

In 2019, the US Department of Commerce slapped tariffs on imported steel and aluminum. In retaliation, Canada imposed matching tariffs and an additional 10 per cent tariff on specific consumer goods.

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