Canada Threatens Tariffs on U.S. Products Over Proposed Electric Vehicle Tax Credits

WASHINGTON – Canada threatens to impose tariffs on U.S. exports, including automotive products, if Congress advances a proposal on electric vehicle tax credits that the Canadian government says constitutes ” significant threat ”to its automotive industry.

In a letter sent to leaders of the United States Senate on Friday, Canadian Deputy Prime Minister Chrystia Freeland and Commerce Minister Mary Ng said they were “deeply concerned” about the tax credits proposed for electric vehicles in the United States. Democrats’ Build Back Better Act.

“We want to be clear that if there is no satisfactory solution to this issue, Canada will defend its national interests, as we did when we were faced with unjustified tariffs on steel. and Canadian aluminum, ”they wrote in the letter.

“In this regard,” they continued, “Canada will have no choice but to react forcefully by initiating a dispute settlement process under the USMCA and imposing tariffs on US exports. ‘in a way that will impact American workers in the auto industry and many other industries. of the American economy. “

Canadian officials have said they are preparing to release a list of US products “in the next few days” that could be subject to tariffs if there is no “satisfactory resolution.” The tariffs would include the automotive sector, among other industries, the letter said.

“At the same time, we intend to clarify which US companies and workers will be affected,” they wrote.

The problem is a proposal championed by Michigan Senator Debbie Stabenow and Representative Dan Kildee that would increase consumer tax credits to $ 12,500 for electric vehicles assembled at a factory represented by a union with batteries produced. in the USA. After five years, only electric vehicles assembled in the United States would be eligible for the proposal’s $ 7,500 base credit.

The proposal is backed by President Joe Biden but faces potential hurdles as the Senate deals with the massive social spending and climate bill.

The letter’s recipients include Majority Leader Chuck Schumer, Minority Leader Mitch McConnell and Senator Joe Manchin, a Democrat from coal-producing West Virginia and a decisive vote who called the credit “bogus” additional tax of $ 4,500 for electric vehicles manufactured by unions. and “not American”.

American Honda, Tesla, Toyota, Volkswagen Group of America and other automakers other than Detroit 3 have fiercely opposed the proposed tax credits for electric vehicles. Autos Drive America, which represents the US operations of international automakers, and the American International Automobile Dealers Association have also lobbied against it.

Canada and Mexico have previously warned U.S. lawmakers and the Biden administration that proposed tax credits for electric vehicles could violate trade agreements and harm the North American auto industry.

Mexico this month called the proposal “discriminatory” and said it was analyzing a range of lawsuits, including tariffs, Reuters reported.

On Monday, the European Union also voiced “serious concerns” over the proposed tax credits for electric vehicles.

In a letter sent on December 3, Valdis Dombrovskis of the European Commission urged Senate lawmakers to remove “all elements” from the proposed electric vehicle tax credit which he said would discriminate against electric vehicles imported from the EU as well as EU companies and US workers. companies employ.

The Senate is rushing to complete the Build Back Better bill before the end of the year.

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