Canada threatens U.S. with retaliatory tariffs in EV tax credit dispute
‘Canada will defend its national interests,’ letter to U.S. lawmakers says.
OTTAWA, Canada — A bilateral spat over President Joe Biden’s proposed EV tax credit escalated Friday with Canada formally threatening retaliatory tariffs targeting the auto sector “and several other sectors of the U.S. economy” if the controversial provision remains intact.
Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng sent a letter to eight Senate leaders outlining Canada’s concerns. It warns of the actions the government is ready to take if the current “discriminatory” tax credit in the Build Back Better legislation is passed.
“If there is no satisfactory resolution to this matter, Canada will defend its national interests, as we did when we were faced with unjustified tariffs on Canadian steel and aluminum,” read the letter, referencing a 2018 trade dispute that Freeland was on the frontlines of at the time.
“Canada will have no choice but to forcefully respond by launching a dispute settlement process under the USMCA and applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the U.S. economy,” the letter read.
The letter is the most detailed account to date of actions Canada is ready to take as the Democrats’ $1.7 trillion spending legislation continues its way through the Senate.
Impact: Beyond retaliatory tariffs, Freeland and Ng write Canada is open to suspending new NAFTA concessions “of importance to the U.S.,” if the U.S. proceeds with the EV tax credit, as written.
They identified “dairy tariff-rate quotas and delaying the implementation of USMCA copyright changes” as areas for potential suspension.
“In the coming days, we are preparing to publish a list of U.S. products that may face Canadian tariffs if there is no satisfactory resolution of this issue,” read the letter. “While including the auto sector, our proposed retaliatory actions will extend across a number of sectors. At the same time, we intend to make clear which U.S. businesses and workers will be impacted.”
Details: The letter identified the issue to be at the “top of Canada’s agenda with the United States.”
It was addressed to Senate Majority Leader Chuck Schumer, Minority Leader Mitch McConnell, and top Democrats and Republicans on the Senate’s finance, foreign relations, and energy and natural resources committees: Sens. Ron Wyden (D-Ore.), Mike Crapo (R-Idaho), Bob Menendez (D-N.J.), Jim Risch (R-Idaho), Joe Manchin (D-W.Va.) and John Barrasso (R-Wy.).
Its language marks a stronger policy position from Canada, which up until Friday has been thin on specific retaliatory actions the federal government is ready to take to push Democrats to reconsider the $4,500 tax credit expansion to consumers who buy American-assembled EVs.
Freeland and Ng’s letter comes a week after Mexico threatened the U.S. with retaliation if the EV tax credit goes through.
Background: The Canadian government’s threat comes a week after Ng led a cross-party Canadian delegation to Washington, D.C., to convince lawmakers to amend the contentious tax credit expansion.
Canada’s delegation, which included Conservative MP Randy Hoback, NDP MP Daniel Blaikie and Bloc Québécois MP Sébastien Lemire, met with 50 officials, labor, business and automotive leaders, according to Ng’s office.
While Ng was able to meet with U.S. Trade Representative Katherine Tai, she did not get face time with top Democrats and Republicans identified in Friday’s letter.
Ng met with Wyden in a virtual meeting Wednesday.
What’s next: Canada will publish its list of U.S. products it will target with retaliatory tariffs.