China slapped tariffs on over $2.6 billion in Canadian goods on Saturday, escalating a trade war that began even before Donald Trump won his second term in the White House.
Canada announced higher tariffs on Chinese steel, aluminum, and electric vehicle (EV) products in October, following up on a wave of duties that Canada, the U.S., and the European Union (EU) began imposing against Chinese-made EVs in August.
Western governments accused China of dumping huge inventories of heavily-subsidized products into other countries, in a bid to undercut their domestic industries by driving prices down. This complaint was especially forceful when it came to the EV market, which Western governments had nourished with heavy subsidies of their own for many years. The Chinese were poised to wreck the EV market with a flood of extremely cheap vehicles.
China responded with outrage to these tariffs, accusing Canada and the other Western powers of “protectionism” and “violating World Trade Organization rules.”
When Canada added another 100-percent surtax on EVs and an additional 25 percent to tariffs on Chinese steel and aluminum, China vowed to retaliate. The Chinese made good on that threat on Saturday with 100 percent tariffs on canola oil and peas, plus 25 percent on port and seafood, mirroring Canada’s tariffs on EVs and steel. Canola oil is one of Canada’s biggest exports to China.
“Despite China’s repeated opposition and dissuasion, Canada has taken unilateral restrictive measures on electric vehicles, steel, aluminum and other products imported from China without investigation, undermining China-Canada economic and trade relations,” the Customs Tariff Commission of China’s State Council pontificated.
The Chinese commission said it has conducted an “anti-discrimination probe,” which determined Canada’s “restrictive measures against some Chinese products” have “disrupted normal trade order and harmed the legitimate rights and interests of Chinese enterprises.”
“China urges Canada to immediately correct its wrong practices, lift restrictive measures and eliminate adverse effects,” the Chinese Commerce Ministry arrogantly declared.
China’s retaliatory tariffs are scheduled to take effect on March 20.
“The impacts will be widespread and will be felt across the industry, starting with farmers who grow the crop every year and extending beyond there to the companies that provide them with seeds and inputs … to grain companies and processors and ultimately to exporters,” Canola Council of Canada president Chris Davison told Global News.
“We’re expecting to work with the Canadian government very quickly to address the situation we face but also to pursue a resolution to it as expeditiously as possible,” Davison said.
Some Canadian officials complained China’s tariffs were “unfair,” while others felt that Canada had been pulled into a trade war that was really between Beijing and Washington.
Scott Moe, the premier of Saskatchewan, grumbled that Canadian canola has been “put in the line of fire due to tariffs on Chinese EVs, which nobody wants, to protect North American EVs, which few can afford.”
“The timing may serve as a warning shot. By striking now, China reminds Canada of the cost of aligning too closely with American trade policy,” Dan Wang of the Eurasia Group in Singapore told Reuters on Saturday.
“China’s delayed response likely reflects both capacity constraints and strategic signalling. The commerce ministry is stretched thin, juggling trade disputes with the U.S. and European Union. Canada, a lower priority, had to wait its turn,” Wang said.
Trivium China agriculture analyst Even Pay expressed confusion about China picking a big trade fight with Canada at this particular moment, suggesting Beijing’s plan might be to drop the tariffs after the new Canadian government is sworn in following Prime Minister Justin Trudeau’s departure, in a grand gesture to “reset” relations and woo Canada away from the United States. The Chinese did something similar to Australia after former Prime Minister Scott Morrison had called for an inquiry into China’s role in starting the worldwide coronavirus pandemic.
The New York Times (NYT) offered a similar theory, seeing China’s tariffs as a “clear warning to Canada – and, indirectly, Mexico – not to cooperate with the United States on trade.”
While the Chinese government took pains not to explicitly state such a goal, which would be an unambiguous violation of WTO rules, Chinese state media felt no such reticence. China Central Television (CCTV), for example, openly touted the new tariffs as a “strong warning to some countries that intend to impose additional tariffs on China in exchange for the United States not to impose additional tariffs on them.”
According to the NYT, China could have waited up to six more months to respond to Canada’s tariffs on steel, aluminum, and EVs, but “decided to act sooner” after Trump threatened to impose 25 percent tariffs on Canada and Mexico.
U.S. Commerce Secretary Howard Lutnick said on Sunday that Trump will keep tariffs on Canada and Mexico until “fentanyl ends.”
“This is black and white. You got to save American lives,” Lutnick said.
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