Conservative Party leader Pierre Poilievre’s recent call for the government to impose major tariffs on Chinese electric vehicles alongside other manufactured goods is bound to provoke an intra-conservative debate—in particular, whether this is a genuine case of national security or standard-fare protectionism for a preferenced sector.
The notion that Canada ought to think about China in different terms than other countries is itself not controversial. I’ve made this case in various places, including a 2022 debate hosted by the Ontario Chamber of Commerce. My debate opponent, Andrew Coyne, has even come around to this position in a May 2024 column.
The question is: what does that mean in practice? Should Canada impose tariffs on all incoming Chinese goods? Should it limit tariffs to ones with clear national security implications? If yes to the second question, how does one define these strategic sectors or productive capacities?
I’d be happy for us to take a far harder line on China. I’ve written in favour of new global trading arrangements among capitalist democracies that exclude China. I’d support a serious programme of decoupling even if came at some cost. And I’d even be open to international efforts to seek reparations for its negligence in the COVID-19 pandemic.
But few mainstream politicians are arguing for such a fundamental shift in our relationship with China. Instead they’re talking about limited sectoral tariffs in cases where China is capable of undercutting Western producers. In such a context, I find it challenging to make the case that electric vehicles are a strategic sector or a national security risk.
One might not like that China gains a foothold in the emerging sector but it’s hard to argue that such a consumer technology crosses the threshold into a no-go zone. On a spectrum with high national security products like semiconductors on one side and low-security products like t-shirts on the other side, electric vehicles strike me as much closer to the latter than the former.
Proponents of such tariffs make various arguments. Some are more or less compelling. But fundamentally one gets the sense that for the Biden administration and the Trudeau government, it’s really about protecting the massive public subsidies that they’ve granted to the industry. Yet that’s less a case in favour of protectionism and more a case against corporate subsidies in the first place.
If the Chinese government wants to effectively subsidize Canada’s transition to electric vehicles, it’s far from obvious why we should resist it. We cannot argue it’s because we’re opposed to subsidies on principle given that Canadian governments have dumped more than $50 billion of public dollars into our own electric vehicle industry. The only case is that China’s electric vehicles are too inexpensive. Yet that’s a pretty weak argument that fails both an economic and environmental test.
It fails on economic grounds because higher prices don’t just affect individual consumers which they manifestly do, but, as David Frum sets out in this week’s Hub Dialogue podcast, they would harm the economy as a whole because the higher transportation costs and attendant inefficiencies will spread throughout. This is consistent, by the way, with the Conservative case against the consumer carbon tax.
A BYD e6 electric taxi is displayed in Hong Kong, May 15, 2013. Vincent Yu/AP Photo.
As for the environment, the overall goal of any climate-related policy agenda ought to be to lower carbon emissions at the lowest cost possible. If the Canadian government is going to mandate that consumers must purchase electric vehicles (including its current goal of 100 percent zero-emission vehicle sales by 2035) on emission-reducing grounds, it’s a bit perverse to force them to pay for higher-priced vehicles. Not only will it hurt their pocketbooks, but it will drive up the cost of emissions reductions and make the trade-offs between the economy and our environmental goals more costly.
The net effect is to expand the scope of the “Laurentian capitalist” model in which government and industry conspire together to limit competition and keep prices high. One can even argue that this particular case is even more perverse given the interaction between the billions in public subsidies, the electric vehicle mandate, and now possible tariff barriers on competitors. It amounts to a state-imposed transfer of wealth from ordinary Canadians to large multinational automakers in the form of subsidized and regulated profits.
Which brings me back to the fundamental question of the costs and benefits inherent to rethinking our relationship with China. As I said, I’d be prepared to put my credentials as a China hawk up against virtually one’s. But if we’re not fundamentally decoupling, what’s the case for protecting the electric vehicle industry compared to China’s other imports? Why wouldn’t the same argument extend more broadly?
Now, Canada may ultimately have limited options but to follow the U.S. lead on tariffs given the integration of our auto manufacturing industry. But that still highlights an inherent problem. Our economic approach to China is ad hoc and reactive. We still lack a clear way of thinking about our evolving economic and geopolitical relationship.
As the world enters a new era of competition with China, the current debate over electric vehicles will hardly be the only instance where we need to make judgements about what sectors are strategic or involve national security implications and therefore justify some form of state intervention to protect from Chinese control and influence. We need a coherent and principle-based framework for making these calls such that they don’t become a basis for rent-seeking and politicization.
No to tariffs on Chinese electric vehicles. Yes to a more hard-headed approach to Canada’s relationship with China.
Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well as a think-tank scholar and columnist. He previously served as a senior economic adviser to Prime Minister Stephen Harper....
