Canadian Trade War

Canada delivered a letter to a number of senior U.S. senators threatening to suspend parts of the USMCA trade agreement unless the Senate backs away from a tax credit for American-built electric vehicles. In the letter, Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng stated that certain provisions of the electric vehicle tax credit violates American obligations under the USMCA. 

That act, proposed by Congress, has not yet been passed into law but is currently in the Senate for approval. Provisions in the act propose large tax credits of up to $12,500 for American buyers of new electric vehicles. But to qualify, those cars must be manufactured by union workers in the U.S. Analysts believe that such tax incentives could effectively put a 34 percent tariff on Canadian-built electric vehicles destined for the American market.

Canada’s International Trade Minister Mary Ng explains…tape

Cut #1                   :20          OC:…”we need to.” 

“This issue of the EV credits that’s part of the Build Back Better bill is in the U.S. senate right now. It’s equivalent to what is a 34 percent tariff on Canadian automobiles. If we are not able to find a solution, or a resolution, Canada would be prepared to defend its interests, and to retaliate should we need to.”

 

However, Friday’s letter from Canada also included a potential solution. It suggested making Canadian-assembled vehicles and batteries eligible under the U.S. tax proposal. Then, on Monday, Prime Minister Justin Trudeau upped the ante, stating that Canada would align its own electric-vehicle incentives with those in the U.S. – but only if Canadian-built cars and trucks could be made eligible for the proposed U.S. tax credits.