October 1st marked implementation of the Justin Trudeau government’s 100 percent surtax on imported Chinese electric vehicles (EVs). China has responded with an anti-dumping investigation into Canadian exports of canola – a critical cash crop for Canada’s farmers that is certainly not being sold in international markets for less than its domestic price.
China’s move resembles its past economic reprisals. Following Canada’s 2019 detention of Huawei’s chief financial officer, Meng Wanzhou, China retaliated by imprisoning two Canadian citizens and blocking canola imports from major Canadian exporters, costing Alberta, Saskatchewan, and Manitoba farmers an estimated $1.5 to $2.4 billion. As Canada’s second-most grown crop, canola contributed $13.6 billion to farm revenue last year, with China purchasing nearly 4.5 million tonnes worth almost $4 billion in 2022 alone.
The Liberal government rationalizes the EV surtax by labelling Chinese imports an “extraordinary threat” to Canadian auto workers. But Canadian auto workers are making almost no EVs. The real threat to them is the Trudeau government’s mandate that the auto industry phase out internal combustion engines by 2035.
Globally, such mandates have spurred panic among manufacturers. Italian Prime Minister Georgia Meloni recently condemned the EU’s similar mandate as “self-destructive,” with one of her ministers calling for a reassessment of the EU’s gasoline and diesel engine ban. Donald Trump recently promised that, if re-elected U.S. President, he will end his country’s EV mandate on his first or second day in office.
The Trudeau government, however, remains stubbornly stuck to the 2035 timeline. It is leaning heavily on subsidies to force Canada’s transition to EVs, committing $52.5 billion to attract Honda, Ford, Stellantis, Volkswagen, and General Motors, along with Swedish battery maker Northvolt – a company that’s in deep financial trouble – to Ontario and Quebec for EV production.
These gargantuan subsidies actually exceed the amount of private capital put up by the manufacturers themselves, suggesting their facilities will “create” some of the highest-cost jobs ever seen in Canada. They are highly unlikely ever to generate enough revenue to recover their expenses, never mind providing a return on the taxpayer’s investment.
Adding to EV manufacturing uncertainty, global demand for EVs is slowing. As Forbes recently reported, fully-electric passenger car demand is weakening, with unsold inventory piling up. Even prominent manufacturers are cutting back on production and investment. Apple has exited the EV market entirely, and in China, fields of unsold EVs clog ports and shipping hubs.
The primary problem, then, isn’t the Chinese EVs themselves. And Canada’s main response – imposing an unprecedented 100 percent surtax that surpasses even the tariffs that Trump levied on China when he was President – carries grave risk. Canada lacks the broad economic leverage for a tariff war, making canola, an essential Canadian export and the number-one item our country sells to China, an easy target for Chinese “tit-for-tat” retaliation.
And it will be Western Canadian farmers who are handed much of the bill for this trade war. Farmers who are already unjustifiably burdened by the federal carbon tax. According to calculations by the Agriculture Carbon Alliance, the carbon tax now costs the average livestock farmer $726 per month, crop farmers $2,024 and greenhouse operators $17,173. A sampling of 50 farms surveyed by the organization paid $329,644 in carbon taxes in one month, a figure that the ever-rising tax could drive to nearly $900,000 per month within a few years. The carbon tax effectively redistributes hard-earned wealth from Western Canadian farmers to subsidy-dependent industries in Ontario and Quebec.
Meanwhile, Canada’s agricultural sector faces a looming labor shortage. A recent Royal Bank of Canada study warns that 40 percent of Canadian farm operators are expected to retire by 2033, potentially leaving 24,000 job vacancies across the farming, nursery and greenhouse sectors. “These gaps loom at a time when Canada’s agricultural workforce needs to evolve to include skills like data analytics,” the study states. “To meet our medium and long-term goals, we’ll need to build a new pipeline of domestic operators and workers.”
The future of Canadian EV manufacturing is entirely reliant on taxpayer-funded subsidies, while Canada’s agricultural industry – despite facing inherent risks from fickle markets and weather – has historically been on balance profitable and generally self-sustaining. What agriculture needs is relief from burdensome policies like the carbon tax – not added financial strain to support an industry in which Canada has no inherent economic advantage.
So rather than doubling-down on artificial industries, we should prioritize drawing young people into farming and equipping them with the skills necessary to meet future challenges. A country that cannot fuel or feed itself is vulnerable, both in times of stability and crisis.
Canada’s abundant natural resources – oil, natural gas, coal, forests, fisheries, and fertile soils – have long been integral to its economic success. Government policy should respect this by prioritizing self-sustaining industries. Subsidizing EV manufacturing while imposing punitive taxes on agriculture jeopardizes both rural livelihoods and Canada’s food security. At a time when natural advantages should be leveraged, the Trudeau administration’s focus on an economically untenable EV sector risks eroding Canada’s self-sufficiency and stability.
The original, full-length version of this article was recently published in C2C Journal.
Gwyn Morgan is a retired business leader who has been a director of five global corporations.
