Trump Wants Canada to Blink. Should We? Absolutely Not

[00:00:00]Well, Donald Trump is at it again at lying new tariffs to the Canadian economy.

[00:00:06]This time the auto sector is going to be seriously affected again.

[00:00:11]Adam, what's your take and give us an overview of what's going on and and how this is going to be new tariffs are going to be applied.

[00:00:18]>> At this point the Trump administration has introduced new tariffs.

[00:00:23]They are levied on on a whole range of goods and and what the US is claiming at this point is that these are in response to some of the the tariffs that that Canada had levied in response to the initial tariffs introduced by by the US.

[00:00:37]And so our view on these the these new tariffs are are are pretty clear. We really should not change our approach to how we are developing policies to to aid and accelerate the uptake of EVs in Canada. You know, this is another attempt by by the US to to shape Canada's policies and and you know, we really don't think that we should be responding to that by changing our our policies and our approaches to the things that that matters to Canadians.

[00:01:07]In particular the the uptake of EVs.

[00:01:11]>> Um One of the things that let's put some context in this for viewers because the the federal government introduced a new auto strategy which is and you know, EVs get more attention in that auto strategy, but we really haven't seen much action on it since it was introduced in the in the spring. Um we also have a new electricity strategy where the prime minister said very clearly we need to double power generation in Canada partly because Canadians are buying more electric vehicles, but the fact is that Canada is not a leader in the electrification of transportation and like EVs make up only 3 and 1/2% of our national auto fleet and we haven't even begun to think about electrifying things like semi trucks, you know, freight trucks, delivery vans, that sort of thing. So, how does how does this new approach or how our response to Trump's tariffs and our strategy around the auto sector figure into the fact that we really haven't electrified much of our transportation?

[00:02:18]>> Yeah, absolutely. So, the government announced an auto strategy last year. One of the primary pieces of that auto strategy was a new what was called a vehicle emissions standard or VES. And so, the VES was in replacement for the EV availability standard. That was the previous policy put in place to accelerate the uptake of EVs in Canada.

[00:02:40]And and so, it called for 100% electrification or 100% of the sales of vehicles in Canada to be EVs by 2035.

[00:02:49]So, you know, that was introduced in 2022. We certainly saw a lot of change since then. Not least of which, of course, the the the trade turbulence that we've seen over the last few years. And so, the current administration or the current government really wanted to a reset, to introduce a new policy that they thought was going to be more effective in in responding to those and and of course, you know, continuing that electrification. And so, the auto strategy proposed the vehicle emissions standard. Now, that has not yet been released. We've been waiting that.

[00:03:20]Initially, it was announced that it would be in June.

[00:03:23]Now, it is it is summer and we have not yet seen the details. Understanding is that the target of that new regulation will be 75% of EV sales by 2035, which is obviously a bit of a step down from 100%. But there are certainly arguments to be made that there were real challenges there. Um, what our concern is is that the vehicle emission standard essentially sets a fleet average for all auto makers to reach and that standard is really what drives the the the uptake of EVs. And so we want to see that standard be as stringent as possible. So we have research that that suggests and and is supported by other research for example by the International Council on Clean Transportation that says that suggests we need to reach at least a 60 g per mile standard in order to see that 75% uptake by 2035.

[00:04:22]>> Adam, but isn't Canada stuck in a very difficult situation because on the one hand we want to electrify our transportation sector at least that's what we say. But on the other hand we've had the you know 100% tariff on Chinese EVs since you know I forget we we put it on in 2023 or something.

[00:04:45]So we've kept low cost EVs out of the market. The legacy auto makers that that do manufacture in Canada only produce high high price EVs in the 50 60 70 80 thousand dollar range not 20 or 30 thousand dollars. So what we're saying is we we want to electrify but we keep the unaffordable the affordable EVs out and and the only thing we're left with is the unaffordable electric vehicle. I I don't see how any emission strategy is going to resolve that basic conflict or contradiction in the policy.

[00:05:25]>> Absolutely. It it certainly does come down to affordability. So so I think there's there's two pieces of this. So one is by increasing the vehicle emission standard you're going to to essentially incentivize manufacturers to begin to introduce lower cost models to Canada. They are producing many of these vehicles. Europe has over 20 vehicles that are EVs that are sub 40,000 dollars. Canada right now has five. We need to see more of those vehicles uh offered for sale in Canada, and the VES will help that uh help that. Canada has also opened our market to to up to 50,000 uh Chinese EVs a year. Uh the initial focus is really on affordable vehicles. We haven't seen the uptick of that yet, but but I expect we will. And so that's the other piece of this story.

[00:06:12]You know, we do need to increase or or open our market to to more affordable vehicles, uh and that is a piece of that. We know that the Trump administration is not fond of these vehicles. And and this is very much an area we also don't want to see Canada blink. Uh certainly the the the the new tariffs and the previous tariffs were in some ways designed to to get Canada to to change some of our policies.

[00:06:35]And that opening uh uh of the market to to at least a a number of those uh lower-cost Chinese EVs uh is an important part of that strategy.

[00:06:46]>> Well, let's talk about that for a moment because Canadians buy 2 million uh automobiles, light passenger vehicles, a year. And we're allowing in 45,000 uh per year from uh China, the low-cost EVs, ramping up to 70,000 by year year five, and we don't have any targets or agreements beyond that.

[00:07:08]So it's a very very tiny uh percentage of our, you know, total auto sales uh every year. At time, while there are uh uh some legacy auto low-cost EVs in the market in Europe, they're mostly Chinese EVs because they have a Europe has taken a different approach to tariffs.

[00:07:29]And the legacy automakers appeared I I think it's generally agreed just simply cannot make a decent low-cost EV.

[00:07:38]They don't have the the scale and and the efficiencies that the the Chinese manufacturers do.

[00:07:44]I don't see a way out of this pickle. We we're in a we're in a we're being squeezed from all sides. And let's not forget Trump's stated strategy is desire to basically eviscerate our auto industry and move all of that production down into the US.

[00:08:02]It seems to be that a vehicle emission strategy is a very weak sauce in trying to resolve all of that and it you know a strategy to work our way out of that.

[00:08:12]>> Yeah, absolutely on its own I I I I would not disagree. That is why the auto strategy needs to be really comprehensive and have a number of different pieces within it. And so, you're right in in the sense that you know 50,000 vehicles is not a lot of vehicles you know in comparison to the total market.

[00:08:30]But it's a cautious first step and I think it's an important one because auto makers in Canada and the US will be forced to to respond. They will need to begin to offer comparable options, more cost-effective options for in order to compete. And so we think that even with that small number we're going to see an impact on competition.

[00:08:50]We're going to see an impact on them developing lower cost alternatives. And of course where they've already done that, introduce those into the North American market. The other challenge of course it is to our auto industry. And and and that that that is an absolutely real challenge. There are some options Canada has. So part of that agreement to accept Chinese EVs into Canada of course was to come a manufacturing strategy as well. Simply you know offering access to the Canadian market in return for locating some manufacturing in Canada, creating jobs, creating that supply chain in Canada. Canada will need to diversify. About 85% of the vehicles that that are produced in Canada right now are for the US market. It was you know it took a long time to develop that integrated North American auto market. And so, if we take if we assume that the Trump administration's goal really is to reshore all of that manufacturing back to the US, Canada is going to have to find a different strategy. We're going to have to diversify. And it's very clear that the rest of the world is racing ahead with electrification. So, yes, the US is it seems to be going backwards. Europe is at a 30% or higher uptake of vehicles. China is over 50%. We see, you know, similar rates of adoption in many other markets. This is where the world is going. So, if Canada wants a competitive auto industry, it needs to move towards electrification. And and that really does need to start with creating domestic demand for those vehicles. And that is where the vehicle emission standard can play a really important role. This can help create that demand or secure that demand in Canada and ensure that that, you know, those EV companies that do want to or considering locating manufacturing to Canada know that there's a viable market here, people who will buy those vehicles.

[00:10:48]>> Adam, let's go back to the beginning of this conversation and and talk about the effect of Trump's tariff. What exactly has Trump put tariffs on in the context of the auto sector? And has the federal government responded yet with anything other than the vehicle emission strategy?

[00:11:07]>> In terms of the direct response to these tariffs, no, I don't believe there there has been introduced. I believe they are considering some tariffs in retaliation.

[00:11:15]What that would look like, they have not yet released. In terms of the automobiles, you know, really what we're looking at is that is the original 232 tariffs that the section 232 tariffs that then introduced a 50% tariff on Canadian automobiles.

[00:11:30]You know, it is really sort of a a reaffirmation of that strategy and these new uh tariffs are essentially a response to Canada's response. Uh Canada imposed its own set of tariffs on US vehicles um and so I think that the the hope here is that by applying new pressure to Canada, we will back off some of those policies. And I think it's pretty clear uh of that it is not a response that Canadians should make. We really need to continue our policies like opening our market to Chinese EVs like a vehicle emission strategy uh vehicle emission standard uh that can really help uh ramp up the the the acceleration of uptake of EVs in Canada.

[00:12:12]>> Adam, is is Canada responding quickly enough? Uh I mean, the the numbers we've talked about, you know, the importation of Chinese EVs, it's going to be a long time before that makes sense any significant impact on the Canadian market. Our policies of attracting, you know, EV manufacturing from other, you know, non-North American sources doesn't look like it's going to be done quickly.

[00:12:36]What Take a look out 5 or 10 years and what does success look like for Canada?

[00:12:42]>> I think success looks like a 75% uh sales of EVs by 2035. I think that's a very reasonable target for Canada. If we look at Europe, which which is a a jurisdiction that's really accelerating here, uh their goal is 90% uptake of those vehicles by by 2035. And so I think Canada is is charting a very reasonable middle path here. Uh we're not abandoning EVs very much like our neighbors to the south uh um but we are um continuing an ambitious strategy.

[00:13:13]What we need to ensure though is that that vehicle emission standard when it's released really does meet that ambition.

[00:13:19]75% uptake of those vehicles is is a reasonable goal uh but we need of course to put smart policy in place that's going to help us realize that goal.

[00:13:28]>> Adam, is there anything any issues any questions that we should have talked about we haven't talked about?

[00:13:36]>> Absolutely. I think most of the time when we're talking about EVs, we're mostly talking about light duty vehicles and I and I think that's quite normal.

[00:13:42]That's really where you know consumers are interested in. You know, we know that that consumers have faced a lot of challenges around affordability, particularly you know the price of oil and and and so you know looking for a strategy that that that can decrease the price of EVs in Canada is a direct response to that affordability crisis.

[00:14:00]Of course, there are medium and heavy duty vehicles. Buses and trucks are another part of this story.

[00:14:06]Um you know, we know they can be a little more difficult to electrify, but we are seeing some progress in that space as well, particularly when you think of things like last mile delivery.

[00:14:15]So there are opportunities within that segment as well and I and I think there are going to be opportunities as we move forward. I think the other piece of course is you know, the government of Canada has announced a really ambitious electrification strategy. This is about you know, creating you know, a a real sovereign energy system that that that decouples us from from the worst volatility of the oil and gas market, particularly when you think about again gasoline prices.

[00:14:44]And so again, we need to ensure that this vehicle emission strategy is of sufficient ambition to really support that broader electrification strategy, which seems to be you know, really the focus of our of our climate strategy moving forward.

[00:14:59]>> Well, let's talk about it then for a bit because we've criticized the electrification strategy for focusing almost entirely on the supply of electricity. That means doubling Canada's power generation by by 2050.

[00:15:15]The government says in that strategy that it's all about electrification, but it talks very little about demand.

[00:15:23]It doesn't talk about heat pumps for buildings and industrial heat for for industry and it doesn't talk about electrifying transportation in any kind of detail. And so the the question then arises, you know, really what are we doing here?

[00:15:40]You know, what We are not our approach to electrification is tepid. Is what is the point I made in in the essay and I don't see anything in our response to Trump's tariffs or any of our other strategies that would argue against that.

[00:15:56]>> I think it's the vehicle emission standard. I think when it comes to transportation at least that really is going to be the complement to the electrification strategy. The electrification strategy really does focus on that supply.

[00:16:08]But if we're thinking about the demand and we obviously need to increase the demand to make that that supply make sense. It is the vehicle emission standard that can do that. The more stringent that standard is the faster you're going to see EVs the uptake of EVs in Canada. And of course you're going to see that the demand for electricity rise accordingly. And so the vehicle emission standard really is the the obvious complement to the electrification. It's the demand side strategy of that piece. And so we really need to ensure that that's going to be as ambitious as ambitious as possible to to match the the potential ambition of the electrification strategy.

[00:16:47]>> Adam really appreciate your insights as always. Thank you very much for this.

[00:16:51]>> Thank you so much.