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Canada floats EV tax credit changes as Biden's plan stirs controversy abroad

A potential $4,500 increase to the tax credit for US made EVs equates to a tariff, the Canadian Prime Minster said.

GM CAMI plant Canada
Canada believes US policy changes would hurt its own auto industry in a big way.
General Motors

While the US government continues to hash out details on President Biden's Build Back Better bill in the Senate, the proposed electric vehicle tax credit changes aren't sitting well with other countries. On Monday, Canada made it clear it will impose tariffs on US-made goods, but offered an interesting solution to a proposed EV tax credit boost for US-made vehicles.

According to Reuters, which reported on remarks Prime Minister Justin Trudeau made, Canada would "align" its EV tax credit policy with the US. Essentially, Canadian-built EVs would be classified as domestic products here in the US and also qualify for a proposed $4,500 boost over the current $7,500 available to US car buyers today. The monetary increase is available to automakers that build EVs in the US with union labor and a US-built battery, as the bill stands today. The law would also turn make the tax credit refundable, rather than nonrefundable.

The Canadian government argued the extra money amounts to a 34% tariff on Canadian-built cars and the country promised to institute tariffs on a range of American products if the EV tax credit changes become law.

So far, any lobbying from other countries hasn't prompted statements from the Biden administration of Congress. The Build Back Better bill remains stalled in the Senate after passing the House last month. However, if lawmakers and Biden green light a change to the tax credits to extend help to the Canadian auto industry, that perhaps open the door for Mexico to request identical treatment.