If Washington promotes electric cars built in US union shops to the cost of Canada’s auto sector, Canada has threatened to levy sweeping taxes on American exports and suspend portions of a major North American trade agreement.
Deputy Prime Minister Chrystia Freeland wrote to US senators, saying Ottawa is “very worried” about an electric car tax credit proposed in the Build Back Better Act, which she claims breaches the US-Mexico-Canada Agreement.
According to Freeland, the proposed tax credit is akin to a 34% tariff on Canadian-assembled electric vehicles, posing “a substantial danger to the Canadian automotive industry and constitutes a de facto abrogation of the USMCA.”
The proposal, which is part of US President Joe Biden’s $1.75 trillion spending package currently before Congress, encourages the production of electric vehicles in the United States by increasing the tax credit for local union-built electric vehicles (EVs) and phasing out the tax credit for imported EVs after five years.
Mexico and Canada have warned that it jeopardizes the integrated North American auto supply chain made possible by the USCMA, which was signed in 2020 after lengthy negotiations.
Non-union automakers such as Toyota and Tesla have criticized Biden’s idea, calling it a bribe to the United Auto Workers labor union that might stymie the shift to electric vehicles.
If the bill passes, Freeland said Canada may slap retaliatory tariffs on the US car industry and other sectors, block US access to the Canadian dairy market, and delay the implementation of the USMCA’s new copyright rules.
In the following days, Freeland added, a list of US products that could face tariffs in Canada would be issued.
