Canada should 'prepare for the worst' if Biden's Build Back Better Act passes with EV tax credit: Ng

Canadians should “prepare for the worst” if U.S. lawmakers decide to greenlight President Joe Biden’s protectionist Build Back Better Act with the inclusion of the contentious electric vehicle tax credit, says International Trade Minister Mary Ng.

In an interview on CTV’s Question Period with Evan Solomon airing Sunday, Ng spoke about a letter she co-signed with Deputy Prime Minister Chrystia Freeland, which threatens retaliatory tariffs on the U.S. if the tax credit isn’t amended.

“What my hope is, is that we are not going to have to do this at all but what is really important is that Canada prepare for the worst,” she said.

Biden’s tax credit would give consumers up to $12,500 if they purchase a U.S. union-made electric vehicle.

The letter was sent to U.S. senate leadership late Friday evening, as another means to change the position of the Biden administration in favour of Canada’s auto sector.

It states that the tax credit as proposed, violates the American’s obligations under the United States-Mexico-Canada Agreement (USMCA) and is equivalent to a 34 per cent tariff on Canadian-assembled electric vehicles.

“We want to be clear that 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,” it reads.

“In that regard, 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.”

Those tariffs could include suspending USMCA dairy tariff-rate quotas or delaying the implementation of copyright changes.

Ng said the government is working on a list of goods across a wide range of sectors, “over the next number of days” but will continue discussions with congressional leaders to sway them in the opposite direction.

She also stressed that resolving this issue is the “top priority” for Canada.

“The prime minister was very clear and communicated that to the president. The deputy prime minister, myself, my ministerial colleagues have communicated that to the Americans. We are actively working on finding a solution that can work for Canadian industry,” she said.

“But we have to be able to put the U.S. on notice that Canada is prepared to do this.”

Vehicles are Canada’s second largest export. The credits would cost US$15.6 billion over 10 years and disproportionately benefit Detroit's Big Three automakers -- General Motors, Ford Motor Co. and Chrysler parent Stellantis -- because they all assemble their American-made vehicles in union-represented plants.

In an interview on CTV’s Power Play last Thursday, the new U.S. ambassador to Canada David Cohen reiterated that the Build Back Better Act is still a proposal.

“That proposal has not passed, it is subject to debate, it is subject to amendment and there is nothing to rescind at this point because the provision does not exist” he said.

With a file from Reuters