Angry Canada Threatens Tariffs on U.S. Products Over Electric Vehicle Tax Credit Plan

An American flag and a Canadian flag fly at the Canada-United States border crossing at the Thousand Islands Bridge in Lansdowne, Ontario, Canada, September 28, 2020. REUTERS / Lars HagberG / File Photo

OTTAWA, Dec. 10 (Reuters) – Canada significantly toughened its tone with Washington in a dispute over U.S. proposed credits for electric vehicles on Friday, threatening to impose tariffs on a range of U.S. products unless the problem is not solved.

In a letter to senior U.S. Senate officials, Finance Minister Chrystia Freeland and Commerce Minister Mary Ng also said Canada is ready to initiate a dispute settlement process under the United States trade agreement. United-Mexico-Canada (USMCA).

Canada is concerned that the U.S. Manufacturers Tax Credit will undermine its own efforts to produce electric vehicles in Ontario – the industrial heartland of the country – and also undermine the integrated North American auto industry.

“We are writing to express our objection in the strongest terms,” ​​said the letter, which stressed that the government of Prime Minister Justin Trudeau did not want a confrontation.

If the matter is not resolved, “Canada will have no choice but to react forcefully by … imposing tariffs on American exports in a way that will have an impact on American workers in the sector. automotive and several other sectors of the US economy, ”the two ministers continued.

In previous trade disputes between the two close neighbors and trading partners, the two sides have imposed sanctions against a wide range of goods.

Ottawa is set to release a list of U.S. products that may be subject to Canadian tariffs, Freeland and Ng said, adding that Canada may also suspend milk quotas for U.S. producers it has accepted as part of the the USMCA, according to the letter.

Months of lobbying have done little to deter U.S. lawmakers, who are considering a new $ 12,500 tax credit that would include $ 4,500 for U.S. electric vehicles made by unions.

In the letter, Freeland and Ng said the proposal amounted to a 34% tariff on electric vehicles assembled in Canada and posed a significant threat.

The White House has said President Joe Biden considers tax credits a personal priority and the administration does not view them as a violation of the USMCA. Officials said they hoped to work to resolve the dispute with Canada and Mexico, which also oppose the credit proposal.

As late as last Friday, Ng said Canada still had some leeway ahead of the US Senate vote. Read more

When asked why Canada has toughened its tone, Ng spokesperson Alice Hansen said: “We have always been clear that we will stand up for the Canadian auto industry. This is the next step.

Reporting by David Ljunggren in Ottawa Editing by Matthew Lewis

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