For months, Canada has spoken out against proposed US legislation which would offer tax incentives on American-made electric vehicles (EVs).

US President Joe Biden’s Build Back Better Act contains a provision that, if passed, would offer incentives worth several thousand dollars on certain electric vehicles.

Canada opposes this, fearing that it will have a negative impact on its own auto sector, which is closely integrated with that of the United States.

It came to a head on Friday as Canada threatened to impose retaliatory tariffs on the United States if the bill passes in its current form.

WHAT DOES THE BILL OFFER?

by Biden Rebuild Better bill includes up to US $ 12,500 in incentives for select electric vehicles built in the United States and manufactured with union labor.

This includes US $ 4,500 for union-made vehicles and US $ 500 for US-made batteries. The vehicles are expected to be assembled in the United States by 2027 in order to qualify for the total amount of US $ 12,500.

The White House has presented the tax credit as something that reduce the cost of electric vehicles made in the United States for middle-class families, while the bill itself will help the United States meet its climate goals and create millions of jobs.

The bill passed in the United States House of Representatives and awaits US Senate approvalwhich is currently split between 48 Democrats, 50 Republicans and two independents, both in caucus with the Democrats. US Vice President Kamala Harris also holds a decisive vote in the Senate.

WHY IS CANADA OPPOSED?

The federal government opposed the so-called Buy America provision, arguing that it cut vehicles and parts made in Canada and, in turn, harming the North American auto industry, including American workers.

Canada also argues that the tax credit goes against renegotiated NAFTAWhere United States-Mexico-Canada Agreement (USMCA).

In a letter sent on Friday To U.S. Senate leaders and committee heads, Deputy Prime Minister Chrystia Freeland and Minister of International Trade Mary Ng said about half of the content that enters Canadian-made vehicles comes from the United States, the Canadian manufacturers importing more than $ 22 billion worth of American auto parts. every year.

They say US tax incentives are a 34 percent tariff on electric vehicles made in Canada. The two ministers also proposed that, as a potential solution, vehicles and batteries made in Canada be eligible for the same tax relief.

However, their letter also threatened retaliatory tariffs and a reversal of some dairy-related trade concessions if Congress approved the incentives.

This decision dates back to the time when Canada retaliation against the United States after former President Donald Trump imposed tariffs on Canadian steel and aluminum imports.

Ng said CTV’s power play Friday that while Canada does not want to impose tariffs, it is ready to defend the country’s national interests in the event of an unsatisfactory resolution.

“This problem is evolving rapidly,” Ng said. “It’s really important that we communicate very clearly to the United States how much this is having an impact on Canada. “

There is also the question of where the US auto industry will source the minerals and rare earth elements it needs to make batteries for electric vehicles.

In a letter sent in October To U.S. lawmakers and the White House, Ng told Canada is the only country in the Western Hemisphere that has all of the essential minerals needed to make batteries for electric vehicles.

White House press secretary Jen psaki previously said they didn’t think the tax credit violated the USMCA, but instead would help consumers and encourage the purchase of electric vehicles.

“The electric vehicle component of the package is something that the President personally throws at him because he believes it is an industry of the future, an industry that can help create well-paying union jobs,” she said. .

WHAT DID INDUSTRY AND LABOR SAY?

Speaking on BNN Bloomberg Open on Nov. 18, Maryscott Greenwood, CEO of the Canadian American Business Council, said she believed “there was a lot of room” for some deals to be made, suggesting the option of North American tax credits.

Others, like Flavio Volpe, president of the Canadian Auto Parts Manufacturers’ Association, called the proposed incentives “”a greater threat than anything that has been pointed out to us by Donald Trump. “

Unifor National President Jerry Dias, who heads the country’s largest private sector union and whose membership includes auto workers, wrote a column last month in which he said Biden was “wrong” in believing that Americans buying US-made battery electric vehicles would create jobs.

“These vehicles are built with parts made in Canada and contain essential components such as Canadian nickel and cobalt,” he said.

“The point is that the destinies of Canada and the United States are intertwined when it comes to the automobile. “

Earlier this month, the president of Unifor Local 444which represents the unionized employees of the Stellantis Windsor assembly plant, and Brian Masse, NDP MP for Windsor West called on the federal government to increase its incentive for zero-emission vehicles to match that proposed in the United States

On November 17, during an announcement in Guelph, Ont., On domestic production of electric vehicles and batteries, Ontario Premier Doug Ford also said the proposed tax credit violates trade rules.

“We will do whatever it takes to be excluded from this ‘Buy America’,” said Ford. “It’s going to hurt on both sides of the border if he keeps doing this.”

With files from The Canadian Press, Reuters and CTV News Windsor