United States president Donald Trump signed his (deepest of sighs) “One Big Beautiful Bill” into law last week. The legislation enacts any number of changes to the taxing and spending laws of the United States, though it’s manifestly not an act of fiscal conservatism: it will add trillions to the U.S. national debt. There are plenty of reasons for critics to label the bill a massive case of self-harm by the current administration, both economically and politically, but Americans voted for Donald Trump last year and nobody can say they’re getting anything less than what they voted for.
Of the many measures in the Republican spending bill, however, some will be particularly relevant to Canada and Ontario. The new law amounts to a near-total repeal of tax incentives for electric vehicles and renewable energy under the previous president’s Inflation Reduction Act. The severity of the cuts is enough that even Elon Musk has well and truly broken with Trump, as some of the most lucrative revenue streams for his most lucrative company (Tesla) have been eliminated.
The repeal of IRA measures raises questions for both the newish Liberal government under Mark Carney, as well as the Ford government at Queen’s Park. Truly huge amounts of money have already been committed to luring EV parts and manufacturing to Ontario, to the tune of $30 billion in existing commitments. Those commitments were, in turn, largely driven by the perceived need to match America’s Advanced Manufacturing Production Credit, so that Detroit didn’t simply hoover up all of the auto investment on the continent. In at least some cases Ontario and Canada’s commitments seem to end if the U.S. repeals its own subsidies.
Well, the IRA’s subsidies for EVs are being massively pared back where they aren’t being eliminated outright. At the same time, Carney has instructed his cabinet to start looking for deep, aggressive cuts in federal spending. Earlier this year, Premier Ford insisted that Ontario’s commitments to EV manufacturing would continue even if U.S. laws changed, but his government has largely ridden on the back of much more substantial federal commitments. If Ottawa’s subsidies for EV manufacturing dry up, Ontario would either need to make a much larger outlay than it has so far (probably eliminating any chance of balancing the province’s budget before the next election) or risk seeing factories idle. Even if Canada and Ontario both maintain their generous subsidies for EV manufacturing, some companies may simply bail if the massively larger U.S. market no longer looks like a good bet for EVs.
As U.S. and Canadian subsidies are called into question, the auto industry also wants Ottawa to revisit the current law requiring zero-emission vehicles to be 20 per cent of sales nationally starting next year. Automakers have resented the law since its inception and have been lobbying furiously to get it repealed or weakened. They’ve got (Doug) Ford on their side, with the premier telling Newstalk1010 he thinks the mandate should go. It’s more than a little galling: car companies have taken billions of dollars in direct and indirect subsidies for Canada’s EV push, but they’re unwilling to be held to account and put cars in dealerships to make them more easily available to buyers. Nevertheless, they might get their wish under a new prime minister.
There’s currently no indication that Ottawa is looking to get out of EV-supporting policy entirely. But if Canada backs away from subsidies and mandates for electric vehicles it’s surely worth raising the question about whether we maintain our trade barriers for Chinese-made EVs as well. China’s counter-tariffs are currently causing real pain for Canadian farmers, and even if that weren’t true the tariffs make less and less sense if we’ve given up any pretense of goading the North American car industry into making vehicles fit for the 21st century.
Ford’s CEO Jim Farley recently admitted that China is winning the EV race because, “their cost, their quality of their vehicles is far superior to what I see in the west.” If Canada drops subsidies and mandates but maintains its tariffs on Chinese cars we’ll be saying with the force of law that Canadians can’t buy the superior vehicles that China wants to sell us, but also we’ve given up trying to make Ford, GM, and their competitors offer us anything comparable either.
Ottawa may not entirely retreat from supporting EVs, and the politics of this are unpredictable. If Carney backs away from expensive subsidies under budget pressure, he might see the (unfunded) EV mandate as a way to maintain his credibility with environmental voters who continue to back the Liberal Party by huge margins. But the decision is ultimately going to have to come down to a much more fundamental question: what, exactly, are we trying to accomplish with EVs in Canada?
Donate Now