Following through on a threat levied last month, China has officially punished Canadian canola exports with a shocking 75.8% duty, starting Thursday. This latest action represents a new high point in the deterioration of trade relations between the two countries. The joint announcement follows an anti-dumping investigation launched by China last year. This inquiry was in direct response to Canada’s announcement of a 100% tariff on Chinese made electric vehicles.
The timing for this tariff couldn’t be more perfect for the China-Canada talks. These negotiations took place only four days prior to the announcement. Throughout those discussions, negotiators from each country placed a heavy emphasis on reducing a wide range of trade-related concerns. Their conversations led to an unequivocal and stern warning to China.
Background of the Tariff Decision
These newly imposed tariffs are a direct consequence of the retaliation by China against Canada’s trade policy on electric vehicles. Just last year, Canada responded by instituting a 100% tariff on all Chinese electric vehicles that cross its borders. This protectionist measure aimed to support U.S. manufacturing and reduce competition from overseas markets.
China opened an anti-dumping investigation into imports of Canadian canola. They claim that the product is being dumped on their market at prices below fair value. The imposed 75.8% tariff is used as an explicit retaliatory measure. It seeks to raise the trade balance between the two countries.
Trade Dynamics Between China and Canada
Canada has an important role in providing canola to China, supplying over 90% of its imports. Weeding out the canola trade would be a big blow to the agricultural relationship between these two neighbors. It would have a serious and immediate effect on Canadian farmers and exporters. These companies furiously protested the possibility of losing access to the Chinese market for their products.
China only exports about 2,500 EVs to Canada, showcasing a major discrepancy in trade flows. This discrepancy is responsible for raising the most ire. Both countries now find themselves walking a fine line between economic self-interest and continued mutual dependence on trade.
Future Implications and Reviews
North of the border, Canada is preparing to launch an investigation into its own 100% Chinese EV tariff. As this story continues to develop, review is scheduled for October. We hope that this review will inform future trade negotiations and eventually change the course of tariffs China has imposed as a result.
The current trade war shows us how tenuous the current state of global trade is. Retaliatory measures will likely only heat things up more. Industry stakeholders will certainly be watching the rollout with great interest. Both countries are working hard to find solutions to bring balance back to their trading relationship.
