Finance Minister François-Philippe Champagne launched consultations Friday to tighten Canada’s automotive remission framework, a step aimed at forcing global carmakers to choose between local production and stiff surtaxes on imports.
The country’s current remission framework allows Canadian automakers to import a set of US-assembled vehicles tariff-free (as long as they’re USMCA-compliant), provided they maintain production levels and follow through on planned investments.
Last year, as Detroit automakers General Motors and Stellantis cancelled plans for production in Canada amid the trade tensions felt between the US and Canada, the Government reduced their annual remission quotas by 24.2% and 50%, respectively.
Since the government announced its strategy for the auto industry in early February, it has opened the possibility to “strengthen Canada’s automotive remission framework to reward companies that produce and invest in Canada.”
Vehicle assemblers, parts producers, importers, workers’ associations, and unions are invited to submit feedback on potential changes to tariff remission for surtaxes on US-made passenger vehicles by April 13.
“Canada’s auto sector is a pillar of our economy, and our government will do what is necessary to protect and maintain its competitiveness and the well-paying jobs it sustain,” the Canadian Minister of Finance François-Philippe Champagne stated.
“That’s why we are launching consultations to strengthen our automotive remission framework and sharpen our tools to drive production and secure long-term investment to build the next generation of vehicles, right here in Canada,” the Minister added.
US-Canada
According to the Government, more than 90% of Canadian-made vehicles and 60% of Canadian-made auto parts are currently exported to its neighboring country.
The Trump Administration has imposed tariffs on Canada and Mexico despite the United States-Mexico-Canada (free trade) Agreement (USMCA).
Canadian parts that do not comply with the USMCA currently face a 50% tariff (including a 15% baseline duty and a 35% rate added last year) when imported to the US.
Canada has committed to maintaining 25% counter-tariffs on auto imports from the US, as it aims to “ensure a level playing field for Canadian automotive manufacturers in the domestic market.”
USMCA Renegotiation
The renegotiation of the free trade agreement is imminent and must be completed by July.
However, according to a New York Times report in mid-February, citing two Canadian officials involved in the US trade discussions, Canada’s expectations for a full renewal of the agreement are “very low.”
When asked about the renewal of the agreement, Trump said “there’s no real advantage to it — it’s irrelevant. Canada wants it. They need it.”
US and Canadian trade officials plan to meet “in a couple weeks,” US Trade Representative Jamieson Greer told Fox Business Network a few days ago.
A spokesperson for Canada-US Trade Minister Dominic LeBlanc confirmed to Reuters that the officials have held “brief, informal exchanges in recent days about a potential in-person meeting in Washington DC in the near future.”
While Greet noted that the Trump administration is open to ideas for reaching an agreement, the US President has also indicated that Washington could be inclined to leave the USMCA and pursue separate deals with Canada and Mexico.
Greer said US officials want to move vehicle production back to the US, and are concerned about the recent China-Canada trade deal.
“We don’t want a situation where Canada’s being used as a back door for Chinese goods,” he told CBC.
“If Canada wants to agree that we can have some level of higher tariff on them while they open their markets to us on things like dairy and other things, then that’s a helpful conversation,” Greer added.
Canada-China
The current trade scenario has led Canada to shift towards attracting international partners besides the US.
The company reached an agreement with China for an annual import of 49,000 Chinese EVs at a reduced tariff of just 6.1%.
The Canadian government began accepting import permit applications for Chinese-made EVs on Sunday.
Under the new framework, the first 24,500 vehicles can enter Canada between March 1 and August 31 on a first-come, first-served basis.
Global Affairs Canada spokesperson Samantha Lafleur said there is “no predetermined limit” on the number of permits per automaker, but the department “will monitor the application and issuance of import permits for the purpose of providing equitable access to the quota to eligible applicants.”
Tesla, and the Geely-owned brands Volvo Cars, and Polestar — all of which manufacture vehicles in China — are expected to take advantage of the import quota.
Industry Minister Mélanie Joly disclosed in late January that she had met with several companies during Prime Minister Mark Carney’s state visit to Beijing, naming “Hyundai, Volkswagen, BYD, Chery” as examples.
China’s largest carmakers declined to reveal their plans for Canada in the weeks following the trade deal announcement, EV reported in late January.
