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Canada threatens to retaliate against U.S. over electric vehicles tax credit

Christian Fernsby |
Canada is threatening to retaliate with targeted tariffs on U.S. goods if tax incentives for electric vehicles produced by unionized American workers aren’t removed from the Biden administration’s Build Back Better Act.

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The threat was made in a letter Friday to U.S. lawmakers by Canadian Deputy Prime Minister Chrystia Freeland and Trade Minister Mary Ng. They say Canada is prepared to publish a list of potentially targeted goods “in the coming days” if the matter isn’t resolved.

The electric vehicles proposal “is a significant threat to the Canadian automotive industry and is a de facto abrogation of the USMCA,” Freeland and Ng said, referring to the trilateral trade pact between the U.S., Canada and Mexico.

If the provision stays in the bill, Canada “will have no choice but to forcefully respond by launching a dispute settlement process under the USMCA and applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the U.S. economy.”

The ministers also said Canada “would consider the possible suspension of USMCA concessions of importance to the U.S. in return,” and specifically mention measures on dairy.

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