China widens trade battlefield with precedent-setting dispute over Canada’s EV tariffs

In a just-announced investigation into Canada’s ‘discriminatory’ tariffs on EV imports, China has cited new legal language as justification.

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China has vociferously objected to Canada’s announcement of 100 per cent tariffs on Chinese elecrtic vehicles. Photo: AP

Published: 10:00am, 6 Sep 2024Updated: 5:47pm, 6 Sep 2024

China’s investigation into Canada’s tariff hike on Chinese-made electric vehicles (EVs), made on the basis of combating “discriminatory” practices, has set a new precedent and could open up more fronts for future trade disputes, analysts said.

In its statement divulging the probe on Tuesday, the Ministry of Commerce (Mofcom) quoted Article 7 of China’s foreign trade law, which permits countermeasures against “any country or region” as a response to “prohibitive, restrictive or other measures” applied on a “discriminatory basis”.

The investigation, which the ministry said would lead to “necessary action”, was disclosed shortly after Canada said it would apply 100 per cent tariffs on Chinese-made EVs.

“This is a new use of a trade tool for China,” said Yao Weiqun, a professor in economics at the Shanghai University of International Business and Economics.

Though the article has been part of the law since 1994 – when the first version was entered into force – it has never been referenced as justification for a trade action.

“This means on top of the existing mechanism at the [World Trade Organization], China can also officially deal with Canada bilaterally, which opens more ways for this matter to be tackled,” Yao said.