The Biden Administration’s proposed EV tax credit for American-made vehicles could run afoul of the terms in the United States Mexico Canada Agreement (USMCA).
A letter signed by Canadian Trade Minister Mary Ng that was viewed by Reuters last week indicates Biden’s proposed EV tax credit “would have a major adverse impact on the future of EV and automotive production in Canada.”
Under the proposed EV tax credit laws, American purchasers of EVs would be entitled to a $7,500 federal rebate, along with an extra $4,500 for American-made EVs assembled in union facilities and a further $500 if the vehicle had an American-made battery pack. In the letter, Ng said the tax credits would have an adverse impact on the Canadian automotive industry and noted the proposal may run afoul of the terms of the USMCA.
Ng also said she was concerned about the U.S.-centric “protectionist elements” of the proposed EV tax credits, Reuters reports, saying the legislation puts Canadian-made EVs and components at a disadvantage. She also pointed out in the letter that Canada is “also necessary for the United States to achieve its electric vehicle objectives in the future,” as it is home to various rare earth minerals needed to produce EV battery packs, including lithium and cobalt.
Certain foreign automakers have also expressed concern over the tax credits. A group of several German, Korean and Japanese automakers recently signed a letter urging the U.S. House of Representatives to reject the proposed EV tax credit for union-made vehicles, saying the credit would “unfairly disadvantage American workers who have chosen not to join a union.”
Reuters‘ source in Canada said the government would step up its lobbying efforts in the near future in order to try and change the U.S. EV tax credit proposal before it becomes law.
“Ideally we would be able to change the legislation before it gets passed,” the source said.