At issue is a provision in the US Build Back Better Act that offers an additional US$4,500 in tax credits to buyers of electric vehicles made by unionized U.S. workers on top of other incentives.
On Dec 2, 2021 Mexico threatened retaliation in the same EV tax credit dispute. The EU also warned the subsidies could inflame tensions. Canada took a more cautious public line, until today.
A bilateral spat over President Joe Biden’s proposed EV tax credit escalated Friday with Canada formally threatening retaliatory tariffs targeting the auto sector “and several other sectors of the U.S. economy” if the controversial provision remains intact.
Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng sent a letter to eight Senate leaders outlining Canada’s concerns. It warns of the actions the government is ready to take if the current “discriminatory” tax credit in the Build Back Better legislation is passed.
“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,” read the letter, referencing a 2018 trade dispute that Freeland was on the frontlines of at the time.
“Canada will have no choice but to forcefully respond by launching a dispute settlement process under the USMCA and applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the U.S. economy,” the letter read.
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