The U.S. government is proposing a ban on key Chinese software and hardware in connected vehicles on American roads due to national security concerns, the White House announced Monday.
The move marks the latest crackdown on China’s automotive industry by the Biden administration and would effectively bar all Chinese cars from entering the U.S. market. It also raises questions about whether Canada will do the same, after matching America’s lead in slapping high tariffs on Chinese electric vehicles and weighing further restrictions.
The planned regulation by the U.S. Commerce Department, which still needs to be finalized, would also force American and other major automakers in the coming years to remove key Chinese software and hardware from vehicles in the U.S.
A fact sheet from the White House says the proposed rule targets technology and components imported from “countries of concern,” which also includes Russia.
“When foreign adversaries build software to make a vehicle, that means it can be used for surveillance, can be remotely controlled, which threatens the privacy and safety of Americans on the road,” U.S. Commerce Secretary Gina Raimondo told a press briefing.
“In an extreme situation, a foreign adversary could shut down or take control of all their vehicles operating in the United States all at the same time — causing crashes, blocking roads.”
But China has become a particular focus amid fears Beijing is seeking to flood the global market with low-cost EVs through substantial government subsidies that have fast-tracked domestic production.
The Biden administration this summer said it was imposing a 100 per cent tariff on Chinese-made electric vehicles and a 35 per cent duty on imported components like batteries and key minerals and metals like steel and aluminum. The new tariffs went into effect this month.
Canada followed suit on higher tariffs for Chinese EVs, steel and aluminum and is undergoing consultations on whether to do the same for batteries, semiconductors and other components.
Get daily National news
Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.
Asked by MPs at the House of Commons international trade committee Monday how Canada should proceed from those consultations, Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said simply: “Match the U.S. measures.”
The Canadian Vehicle Manufacturers’ Association has applauded the Chinese EV tariffs and warned there is “simply too much at stake” for the industry and broader economy “if Canada is misaligned” from U.S. policy, particularly as the Canada-United States-Mexico Agreement comes up for review in 2026.
There are relatively few Chinese-made cars or light-duty trucks imported into the U.S. and Canada. But Raimondo said the U.S. is acting “before suppliers, automakers and car components linked to China or Russia become commonplace and widespread in the U.S. automotive sector.”
“We’re not going to wait until our roads are filled with cars and the risk is extremely significant before we act,” she said.
U.S. concerns over Chinese software and security are behind other recent technology crackdowns in recent months, including a law that could force a ban of the popular Chinese-owned social media platform TikTok.
The Alliance For Automotive Innovation, a group representing major automakers including General Motors, Toyota, Volkswagen and Hyundai, has warned that changing hardware and software would take time. The group could not detail to what extent Chinese-made components are prevalent in U.S. models.
The actions by the U.S. and Canada against China’s auto industry comes as the two countries seek to establish their own domestic EV manufacturing bases, with connections between the two for a North American supply chain.
The Canadian government and provinces like Ontario have jointly promised up to $53 billion in tax credits, production subsidies and other investments to lure companies like Volkswagen and Honda to build new EV production facilities in Canada, according to a June report from the parliamentary budget officer.
Those commitments have attracted over $46 billion in investments, the report said.
But experts have warned further tariffs on Chinese components could strain current supply chains in the short term and drive up prices for EVs.
Joanna Kyriazis, director of public affairs at Clean Energy Canada, told the House of Commons committee Monday that Canada needed to put affordability and accessibility front and centre in its EV policy going forward.
“Now that Canada has decided to apply an 100 per cent tariff to Chinese-made EVs, the key question is what will Canadian governments and producers do with this time that they’ve bought themselves?” Kyriazis said.
She said Clean Energy Canada recommended that the government consider lower tariffs on Chinese EVs, keeping affordability in mind.
The group urged the federal government to adopt an EV affordability package with three broad policy recommendations.
“First, refund and extend the federal incentive program that helps Canadian drivers go electric. This program is more popular than ever this year, but it’s set to end in March of 2025,” Kyriazis said.
The second suggestion was ensuring new and existing condos and apartment buildings have EV charging installed.
“Millennial Canadians are the most interested in going electric, but they often live in or rent apartment buildings where access to charging is limited,” she said.
“And finally (the federal government should) preserve a strong EV availability standard, which requires car makers to make more EV models available to Canadians and will help drive down the price of EVs.”
Kyriazis said making EVs more affordable for consumers would also offer more market certainty to all stakeholders in the supply chain, like EV charging providers, electric utilities and mining companies, to plan and invest according to expected EV uptakes.
— with files from Reuters
© 2024 Global News, a division of Corus Entertainment Inc.
