Canada among numerous countries opposing proposed U.S. EV tax credit
Trade minister warns of severe economic harm and tens of thousands of job losses in Canadian manufacturing
Canada, the European Union, Germany, Japan, Mexico, France, South Korea, Italy, and other countries wrote U.S. lawmakers saying a proposed U.S. electric vehicle tax credit violates international trade rules, according to a joint letter made public October 30.
A group of 25 ambassadors to Washington wrote U.S. lawmakers and the Biden administration late Friday saying “limiting eligibility for the credit to vehicles based on their U.S. domestic assembly and local content is inconsistent with U.S. commitments made under WTO multilateral agreements.”
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The U.S. Congress is considering a new US$12,500 tax credit that would include US$4,500 for union-made U.S. electric vehicles and US$500 for U.S.-made batteries. Only U.S.-built vehicles would be eligible for the US$12,500 credit after 2027, under a House proposal released this week.
Canada last week issued its own statement opposing the plan. In the letter dated October 22, Canadian Trade Minister Mary Ng told U.S. lawmakers and the Biden administration that the credits, if approved, “would have a major adverse impact on the future of EV and automotive production in Canada.”
She said this would raise the risk of severe economic harm and tens of thousands of job losses in one of Canada’s largest manufacturing sectors, adding that U.S. companies and workers would not be immune from the fallout. The auto industry in both nations is highly integrated.
Ng said the proposed credits were inconsistent with U.S. obligations under the USMCA and the World Trade Organization.
The U.S. proposal is backed by President Joe Biden, the United Auto Workers (UAW) union, and many congressional Democrats, but opposed by major international automakers, including Toyota, Volkswagen, Daimler, Honda, Hyundai and BMW.
The EV tax credits would cost US$15.6 billion over 10 years and disproportionately benefit Detroit’s Big Three automakers – General Motors, Ford, and Chrysler-parent Stellantis – which assemble their U.S.-made vehicles in union-represented plants.