How to Understand China’s EV Dominance in North America

China is the undisputed global heavyweight in the electric vehicle (EV) industry (China’s EV). Indeed, Chinese manufacturers now account for over 70% of global EV production and Chinese-made cars comprise nearly 60% of all new electric cars sold worldwide. Furthermore, Chinese brands like BYD and GAC Aion hold three of the top five spots for global market share. However, despite this global dominance, these affordable, technologically advanced vehicles are virtually non-existent on the roads of the United States and Canada. Consequently, this stark geographical disparity is not due to a lack of quality or consumer demand; rather, it is the result of a deliberate, protective, and geopolitically charged strategy employed by North American governments. China’s EV

The absence of Chinese EVs in the US and Canada is fundamentally a product of protectionist tariffs, national security concerns, and the need to defend domestic auto manufacturing jobs. Ultimately, while consumers miss out on significantly cheaper EVs that would accelerate adoption, policymakers view the influx of highly subsidized Chinese competition as an existential threat to the continent’s automotive future.

The Tariff Fortress: Shutting Down the Price Advantage China’s EV

The primary and most effective barrier preventing the flood of Chinese EVs into North America is a series of escalating import tariffs imposed by both Washington and Ottawa. This wall of duties entirely eliminates the competitive price advantage that makes Chinese EVs a global success.

The American 100% Tariff

The United States has been the most aggressive in using tariffs as a tool of exclusion. In May 2024, the Biden administration quadrupled the tariff on Chinese EVs, raising the rate from 25% to a punishing 100%. Subsequently, this tariff hike has maintained by President Trump and is now in full effect. Therefore, a Chinese EV model like the popular BYD Dolphin Mini, which costs around $21,000 in Mexico, would cost well over $42,000 in the US, before factoring in shipping and regulatory costs. This effectively acts as a de facto ban, ensuring that no mass-market Chinese brand can compete on price with domestic models.

Canada’s Alignment and the WTO China’s EV

Canada followed the US lead, albeit with some diplomatic caution. Effective October 1, 2024, the Canadian government implemented a 100% surtax on all Chinese-made electric and certain hybrid vehicles. Consequently, Chinese EVs entering Canada face a combined tariff rate exceeding 106% when factoring in the existing Most-Favoured Nation import tariff of 6.1 per cent. Canada justified the move as a necessary measure to protect its domestic industry and workers from what it deemed “unfair trade practices,” including state-subsidized overcapacity in China. However, unlike the US, Canada is party to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) within the World Trade Organization (WTO). This means Canada’s tariff policies face a potential challenge from China within the WTO framework.

The Protectionist Imperative: Saving Domestic Jobs China’s EV

The central motivation behind these aggressive tariffs has the existential threat posed to North America’s legacy automotive manufacturing base.

Undercutting the Competition

Chinese EV manufacturers benefit from two major factors that allow them to offer vehicles at prices Western automakers cannot match. First, the Chinese government has provided an estimated $230 billion in financial assistance to the EV sector since 2009. This massive subsidy program has fostered overcapacity and enabled price wars that destroy profitability for foreign competitors. Second, Chinese automakers have significantly lower input costs. For example, hourly wages for assembly line workers in China start around $4.20, drastically lower than the $29 an hour for North American counterparts. Furthermore, battery prices—a major component cost—have 24% lower in China.

Consequently, North American policymakers argue that a flood of inexpensive Chinese EVs would do more than just lower consumer prices; it would effectively destroy the domestic automotive manufacturing business and the millions of jobs tied to it. Therefore, the 100% tariff has viewed as a necessary defense mechanism to buy time for American and Canadian companies to scale up their own EV production and supply chains.

The National Security Argument: Data and Espionage China’s EV

Beyond economic protectionism, the issue of national security has leveraged by both the US and Canada to justify the exclusion of Chinese vehicles.

Vehicle Data as a Threat

Modern electric vehicles have essentially “computers on wheels.” They have equipped with numerous cameras, sensors, and microchips that collect vast quantities of data, including precise geolocation, driver behavior, and voice recordings. Therefore, policymakers worry that a Chinese-made EV could exploited by the Chinese government for espionage or surveillance. Specifically, they fear that the data collected by these vehicles could accessed by Beijing, potentially creating a national security vulnerability for military personnel, government officials, or critical infrastructure. China’s EV

Parallels with Huawei

This line of reasoning draws clear parallels to the previous bans on Chinese telecommunications equipment from companies like Huawei in 5G networks. Consequently, the security concern is not just about the car itself, but about the embedded technology that connects the vehicle to the broader digital world. Thus, the data collection capability of Chinese EVs has seen as an unacceptable risk in the current geopolitical climate. China’s EV

An Incomplete Market: The Missed Opportunities China’s EV

The exclusion of Chinese EVs from the US and Canadian markets carries significant economic and environmental costs for consumers and the transition to clean energy.

Hindered EV Adoption

The primary hurdle slowing EV adoption in North America remains the high cost of entry. The average price of a new EV in the US is approximately $55,000. Conversely, Chinese manufacturers produce several popular, high-quality models that sell for under $25,000 in other markets. Therefore, if Chinese EVs have allowed to enter the market at competitive prices, the adoption rate of electric vehicles would likely skyrocket. This would accelerate the replacement of gasoline-powered cars and help Canada, in particular, meet its goal of 100% zero-emission vehicle sales by 2035. China’s EV

A Segment Gap

Furthermore, the US market has a notably low number of small electric models available. In contrast, the Chinese market has saturated with diverse, affordable small-segment EVs, such as the popular BYD Seagull. As a result, the tariffs prevent North American consumers from accessing the most affordable segment of the global EV market, keeping the electric transition largely focused on larger, more expensive SUVs and trucks. China’s EV

The Future: Tariffs as a Temporary Measure

Chinese automakers are not ignoring the North American market; they are simply changing their strategy to overcome the “tariff fortress.”

Manufacturing Migration

Chinese firms are already exploring manufacturing bases outside of China to circumvent the US and Canadian tariffs. Mexico, with its favorable trade agreements with the US and Canada (USMCA), has seen as the most logical hub. Therefore, a Chinese brand like BYD could potentially build an assembly plant in Mexico, allowing its vehicles to be exported tariff-free to North America under USMCA rules. However, the US has already signaled its intention to close any such loopholes. China’s EV

Global Dominance Continues

Despite the North American blockades, Chinese EV influence continues to expand rapidly in other global markets, including Europe, Southeast Asia, and Latin America. Their competitive advantage in battery technology and development speed (taking only 18 months for product development compared to up to five years for Western brands) ensures that their global dominance is unlikely to wane soon. Ultimately, the US and Canadian tariffs are a high-stakes, defensive measure designed to protect local industry. The long-term success of this strategy will depend on how quickly North American manufacturers can innovate to bridge the price and technology gap. China’s EV

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