Shares of Chinese electric vehicle (EV) companies fell in value on Friday following news that the Canadian government is considering imposing new tariffs on imports of EVs made in China. This action was considered to mirror similar policies adopted by the United States and the European Union.
While no final decisions have been made yet, government officials said they will likely soon announce a public consultation period on the proposed import duties, which would affect the entry of Chinese electric vehicles into the Canadian market, Bloomberg News reported .
In the trading session before the market opened on Friday, the value of shares of Nio (NIO) and Li Auto (NASDAQ:) on the US stock exchange decreased by 1.4% and 1.5%, respectively.
The Prime Minister of Canada, Justin Trudeau, is coming under increasing pressure both within the country and from other countries to adopt a position similar to that of the President of the United States, Joe Biden. In May, President Biden’s administration announced a proposal to substantially increase tariffs on Chinese electric vehicle imports to 102.5%. Similarly, the European Union last week said it planned to increase tariffs on imports of Chinese electric vehicles, with some taxes potentially as high as 48%.
Analysts at Morgan Stanley commented on this situation, saying that the possible import tariffs Canada is considering would represent a symbolic and proactive step by Western nations to limit the growth of the Chinese electric vehicle market before it becomes more significant.
Additionally, analysts pointed out that Canada is a vehicle manufacturing site for U.S.-based original equipment manufacturers (OEMs), such as General Motors (GM) and Ford, and could strategically enhance their vehicle supply chains. batteries thanks to Canadian lithium deposits.
Analysts also noted that establishing local manufacturing is essential to gaining access to developed markets; therefore, for the foreseeable future, emerging markets such as those in the Association of Southeast Asian Nations (ASEAN), Latin America (LaTAM) and the Middle East appear to offer better opportunities for Chinese EV expansion.
Meanwhile, analysts said they will be watching other areas of the North American Free Trade Agreement (NAFTA), particularly Mexico, to determine whether these countries also decide to increase tariffs on electric vehicle imports from China.
The idea of increasing tariffs on imports of Chinese electric vehicles comes in a context in which Western democracies are increasingly concerned about China’s mass production of essential goods. This overproduction is perceived as China’s attempt to control global supply chains and weaken local industries.
Chinese companies like BYD are actively pursuing expansion into international markets, and the production of battery electric vehicles is a key aspect of these import tariff strategies.
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