By Canadian Press

Canada willing to ‘align’ EV incentives with U.S. to avert tax-credit crisis: Trudeau

Dec 13, 2021 | 11:33 AM

WASHINGTON — Prime Minister Justin Trudeau says Canada would ‘align’ its own electric-vehicle incentives with those south of the border if Canadian-built cars and trucks could be made eligible for proposed U.S. tax credits.

Trudeau says the two countries have been building cars together for more than 50 years — an alliance threatened by President Joe Biden’s efforts to boost sales of vehicles made in the U.S. with union labour. 

Deputy Prime Minister Chrystia Freeland and Trade Minister Mary Ng warned Congress last week of retaliatory tariffs and other punitive measures if the tax-credit proposal becomes law. 

In a letter released Friday, Freeland and Ng proposed making Canadian-assembled vehicles and batteries eligible under the U.S. plan, which would be worth up to US$12,500 in tax credits to a would-be car buyer. 

Trudeau’s comments, however, suggest Canada could offer a comparable package that would apply to vehicles assembled in either country.

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The federal government is already planning to retool its existing rebate program, which only applies to new zero-emission vehicles with a maximum base price of between $45,000 and $55,000.

During the federal election campaign, the Liberals promised to spend $1.5 billion over the next four years to expand the program in an effort to get more electric vehicles on the road. 

“We are working very hard with the United States on getting them to understand that this proposed EV rebate for American-built cars only is not good, obviously, for Canada, but also not good for the United States,” Trudeau told a news conference. 

“There are a number of solutions we’ve put forward. One of them would be to align our incentives in Canada and in the United States, to make sure that there is no slippage or no unfair advantages on one side or the other. We are happy to do that.” 

The letter Friday was addressed to key members of the U.S. Senate, which is expected in the coming weeks to vote on the Biden administration’s $1.75-trillion climate and social-spending package, which includes the new EV tax credits. 

The proposal amounts to a 34 per cent tariff on electric vehicles assembled in Canada and violates the terms of the U.S.-Mexico-Canada Agreement, or USMCA, Freeland and Ng wrote — not to mention the affront it represents in a country that’s been a U.S. partner in building cars and trucks for half a century.

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

It promised a forthcoming list of U.S. products Canada is prepared to target with tariffs, both within the auto sector and beyond. 

Senate Majority Leader Chuck Schumer wants a vote on the legislation, which was already approved by the Democrat-controlled House of Representatives, before Christmas. Few see the timeline as realistic, especially after new economic data Friday pegged the inflation rate at 6.8 per cent.

Vehicles built in Canada comprise about 50 per cent U.S. content, said the letter from Ng and Freeland, with more than $22-billion worth of American auto parts being imported by Canadian manufacturers every year.

“To be clear, we do not wish to go down a path of confrontation,” the letter reads. “That has not been the history of the relationship between our two countries — nor should it be the future.”

The letter also threatens to hit the pause button on certain concessions Canada has already made to U.S. dairy producers under USMCA, arguing that the EV tax credits would comprise “a significant change in the balance of concessions” agreed to under the deal.

This report by The Canadian Press was first published Dec. 13, 2021. 

The Canadian Press