Canada to impose new tariffs on China

Canada is to slap more tariffs on a range of imports from China early next year “to combat unfair Chinese trade practices,” the federal government said Monday in its 2024 Fall Economic Statement.

Tariffs are to be put on certain Chinese imports including some solar products and critical minerals next year and on permanent magnets, natural graphite and semiconductors in 2026, Prime Minister Justin Trudeau’s government said. The measures will “prevent Chinese non-market trade practices from causing unfair and harmful market distortions in Canada and throughout the North American continent.”

Details on the tariffs will follow in the 2025 Budget, it said.

In October, Ottawa imposed a 100% tariff on all electric vehicles from China, as well as a 25% tariff on Chinese steel and aluminum products in response to what it describes as “the extraordinary threat to these sectors from unfair non-market competition, and insufficient or non-existent labour and environmental standards.”

Free trade partners only

The government has also limited eligibility for federal zero-emission incentives to Canada’s free trade partners, Ottawa said in its fiscal update.

“Canada will aggressively advance new measures to defend our economic security interests, as informed by Canadians’ input received during consultations on potential new economic security measures,” the 2024 Fall Economic Statement read.

“This includes developing a policy framework to mitigate risks posed by foreign entities owned, controlled, or influenced by a jurisdiction of concern, wherever they may operate,” the statement read.

Those entities could be a channel for policies that harm Canada’s national or economic security, such as entities used to for state-driven ends or that benefit from non-market policies and suspicious practices conferring an unfair advantage competitive advantage over Canadian businesses, according to the statement. They could also exercise undue socio-economic political influence in host countries.

In May, the government placed export controls on certain quantum computing and semiconductor technologies and equipment with potential military applications “to ensure their responsible development and transfer.”

Industry welcomes tax changes

The fiscal update included two amendments that are critical to the mining sector. The first is the proposed expansion of eligibility for the Clean Technology Manufacturing investment tax credit (30%) to include the extraction of critical minerals from polymetallic mines in Canada.

The tax credit, available since January, applied only to mines where 90% of the production value consisted of one or more of six critical minerals—nickel, copper, lithium, graphite, rare earth elements and cobalt. The credit thus could not be applied to polymetallic mines, which host copper, zinc, lead, molybdenum, gold and silver.

“Of all existing copper mines and all known advanced projects, only one met the CTM-ITC as intended,” the Mining Association of Canada (MAC) said in a release on Monday. “The proposed amendment to lower the threshold to 50% retroactive to January 2024 will ensure that copper projects benefit from the CTM-ITC as intended.”

“If the legislation is passed, the CTM-ITC will enable billions of dollars in new investment and the protection and creation of thousands of new jobs in at least four projects—one in Saskatchewan and three in British Columbia that, taken together, will increase Canada’s copper production by more than 50% and erase the significant decline in copper reserves that has occurred over the past 50 years.”

A second proposed amendment in the fall economic assessment would also benefit junior miners that depend on critical flow-through share financings to support exploration, MAC added.

Changes in the 2024 budget to the inclusion rate for capital gains had the “unintended consequence” of reducing the value of the Mineral Exploration Tax Credit (MTEC) to investors, MAC explained.

“At a time when new investment in critical minerals exploration is most needed, it is estimated that of the $1.2 billion raised annually for exploration using the METC, $700-800 million will be lost if the METC is not fixed,” MAC said. “The proposed amendment to the Alternative Minimum Tax will largely restore the value of the METC and ensure investment dollars continue to support mineral exploration in Canada.

Mining contributes $161 billion to Canada’s GDP and makes up 21% of the country’s total domestic exports.