Canada Unhappy With Proposed US EV Tax Credits, Offers Solutions

The $1.75 trillion Build Back Better Act has a provision that’s not making Canada all too happy. The proposed bill includes tax incentives for electric vehicles, though the legislation would also give an additional tax credit to cars made in the US by union workers. According to a new Automotive News report, Canada sees this as a violation of the USMCA trade deal, and the country is currently proposing several solutions to resolve the matter.

The bill, which has passed the US House and currently sits before the US Senate, offers consumers a $7,500 tax credit for purchasing an electric vehicle. However, an additional $4,500 tax credit is available for EVs made by US union workers. One solution Canadian Prime Minister Justin Trudeau is proposing would align EV incentives between the two countries. He wants to make sure there are no “unfair advantages,” according to the publication.

It’s not clear how long it will take for the two to resolve the matter, though Canada doesn’t seem to be taking the bill lightly. Last week, it said it would levy retaliatory tariffs on specific US goods for violating the North American trade deal that also includes Mexico. Japan, South Korea, and others have also expressed displeasure about the proposed incentives.

The US-Mexico-Canada Agreement (USMCA) went into effect in mid-2020, replacing the North American Free Trade Agreement (NAFTA) that had been in place since 1994. We’re likely to see more disputes between the three members as they navigate the real-world implications of the new agreement, and that’s regardless of the BBB Act passing the US Senate.

The three countries are also tussling over their interpretations of USCMA’s 75-percent regional value content rule, which specifies that 75 percent of a vehicle’s content be made in the bloc. It could be too complicated for automakers to meet, making it cheaper for them to pay a tariff instead of building cars and components on the continent.

Source: Automotive News

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